= "a distributed cryptographic ledger shared amongst all nodes participating in the network, over which every successfully performed transaction is recorded". [1]

Contextual Citation

"Why trust Bitcoin, or more specifically, why trust the technology that makes Bitcoin possible? In short, because it assumes everybody’s a crook, yet it still gets them to follow the rules."

- Morgen E. Peck [2]

Definition

Via Aeze Soo:

"A block chain is a distributed data store that maintains a continuously growing list of data records that are hardened against tampering and revision, even by operators of the data store's nodes. The most widely known application of a block chain is the public ledger of transactions for cryptocurrencies, such as bitcoin. This record is enforced cryptographically and hosted on machines running the software."

Description

1. by Jacob Aron:

"The true innovation of Bitcoin's mysterious designer, Satoshi Nakamoto, is its underlying technology, the "block chain". That fundamental concept is being used to transform Bitcoin – and could even replace it altogether.

So what is the block chain? It is a ledger of transactions that keeps Bitcoin secure and allows all users to agree on exactly who owns how many bitcoins. Each new block requires a record of recent transactions along with a string of letters and numbers, known as a hash, which is based on the previous block and produced using a cryptographic algorithm.

Miners, people who run the peer-to-peer Bitcoin software, randomly generate hashes, competing to produce one with a value below a certain target difficulty and thus complete a new block and receive a reward, currently 25 bitcoins. This difficulty means faking a transaction is impossible unless you have more computing power than everyone else on the Bitcoin network combined. Confused? Don't worry, ordinary Bitcoin users needn't know the details of how the block chain works, just as people with a credit card don't bother learning banking network jargon. But those who do understand the power of the block chain are realising how Nakamoto's technology for mass agreement can be adapted. "You can replace that agreement with all sorts of different things and now you have a really powerful building block for any kind of distributed system," says Jeremy Clark of Concordia University in Montreal, Canada." (http://www.newscientist.com/article/mg22129553.700-bitcoin-how-its-core-technology-will-change-the-world.html)

2. Primavera De Filippi

"For many, bitcoin — the distributed, worldwide, decentralized crypto-currency — is all about money … or, as recent events have shown, about who invented it. Yet the actual innovation brought about by bitcoin is not the currency itself but the platform, which is commonly referred to as the “blockchain” — a distributed cryptographic ledger shared amongst all nodes participating in the network, over which every successfully performed transaction is recorded.

And the blockchain is not limited to monetary applications. Borrowing from the same ideas (though not using the actual peer-to-peer network bitcoin runs on), a variety of new applications have adapted the bitcoin protocol to fulfill different purposes: Namecoin for distributed domain name management; Bitmessage and Twister for asynchronous communication; and, more recently, Ethereum (released only a month ago). Like many other peer-to-peer (P2P) applications, these platforms all rely on decentralized architectures to build and maintain network applications that are operated by the community for the community. (I’ve written before here in WIRED Opinion about one example, mesh networks, which can provide an internet-native model for building community and governance).

Thus, while they enable a whole new set of possibilities, blockchain-based applications also present legal, technical, and social challenges similar to those raised by other P2P applications that came before them, such as BitTorrent, Tor, or Freenet."

How it works

Morgan Peck:

"the blockchain is nothing more than a long string of transactions, each of which refers to an earlier record in the chain. But Bitcoin users do not directly make the updates to the blockchain. In order to transfer coins to someone else, you have to create a request and broadcast it over the Bitcoin peer-to-peer network. After that, it’s in the hands of the miners. They scoop up the requests and do a few checks to make sure that the signature is correct and that there are enough bitcoins to make the transaction; then they bundle the new records into a block and add it to the end of the blockchain.

All miners work independently on their own version of the blockchain. When they finish a new block, they broadcast it to the rest of their peers, who check it, accept it, add it to the end of the chain, and pick up their work from this new starting point.

The arrangement will work only if the miners agree on what the most recent version of the blockchain should look like. In other words, they all have to agree on a consensus version of it. But given the fact that they’re all strangers, they really have no reason to trust one another’s work. What’s to stop a miner from fiddling with earlier entries on the blockchain and undoing payments?

The strategy that Satoshi Nakamoto (Bitcoin’s pseudonymous architect) devised for establishing consensus in his system is widely considered to be a breakthrough in distributed computing.

“There have been consensus algorithms running since the eighties, where you come to consensus, providing a log of events on multiple machines, with all the machines participating in that network,” says Paul Snow, the founder of Factom, a service that condenses data and transfers it onto the Bitcoin blockchain. However, he says, these systems were successful only when the participants shared a common allegiance.

Bitcoin replaces that allegiance with mathematical confidence. Given the cryptographic proof required to commit a transaction, we can already be confident that only people who own bitcoins can spend them. But a bitcoin miner can also be confident that the other miners are not changing entries on the blockchain, because in Bitcoin there is no going backward.

That’s because the process of adding a new block to the blockchain is very difficult. Anyone who participates is required to devote large quantities of computing power—and therefore, electricity—toward running the new data through a set of calculations called hash functions. Only once this work is completed can the block be appended to the chain in a way that satisfies other miners on the network.

“You’re building a giant wall,” explains Peter Kirby, the president of Factom. “And every time you want to agree to something, you put a thousand bricks on top of it. And you agree to something else and put another thousand bricks on top of it. And that makes it very, very, very difficult for someone to change a brick way down at the bottom of the wall.”

...

A Nakamoto blockchain, then, becomes more secure as more people participate in the network. But why would they? In the case of Bitcoin, it’s because they are paid to do it. Every time a block gets solved, a virgin transaction is created with a handful of newly minted bitcoins signed over to the first miner who completed the work.

In old security models, you tried to lock out all of the greedy, dishonest people. Bitcoin, on the other hand, welcomes everyone, fully expecting them to act in their own self-interest, and then it uses their greed to secure the network.

“This is, I think, the main contribution,” says Ittay Eyal, a computer scientist at Cornell who studies Bitcoin along with other decentralized networks. “Bitcoin causes an attacker to be better off by playing along than by attacking it. The incentive system leads a lot of people to contribute resources toward the welfare of the system.”" (http://spectrum.ieee.org/computing/networks/the-future-of-the-web-looks-a-lot-like-bitcoin)

Technology

The Blockchain Application Stack

Joel Monegro:

"This is what I think the architecture of Internet applications is going to look like in 10 years. This is just a simple illustration and it leaves a lot of important insights and issues out. I’ll try my best to explain the thinking behind it below. To keep things short, we’ll run through every part of the stack from the bottom up, and do a deep dive on each in future posts.

The basic idea is that everything inside the gray rectangles is decentralized and open source. For now I’m calling these the shared data and protocol layers. Nobody controls these parts of the system, and they’re accessible by any person or company. If we use bitcoin as an example, the blockchain is the shared data layer and the bitcoin protocol is a decentralized protocol that’s part of the shared protocol Layer.

You’ll notice that each layer gets thinner the higher up you go. You’ll also notice that the shared data and protocol layers cover about 80% of the entire stack. Internet applications today are built on top of open, decentralized technologies like TCP/IP and HTTP, but if you were to graph the current Internet application stack like above, those open, decentralized protocols would probably only make up about 15% with everything on top being private and centralized.

1. Miners and the blockchain

If you know a little about how bitcoin works, you know what miners are. In a nutshell, miners are the nodes in a network of computers who, together, verify all bitcoin transactions. In exchange, the algorithm rewards them with bitcoin. Because bitcoin has real-world value, the operators of these machines are incentivized to keep them running. If you’d like to learn more about mining, this is a great explanation of how they work.

The blockchain is the public ledger that holds a permanent record of all bitcoin transactions, and is maintained by the miners. It’s not controlled by a single entity and it’s accessible by everyone. You can read more about the blockchain here.

2. Overlay networks

This is where things start to get interesting. Developers are starting to build networks that work in parallel to the bitcoin blockchain to perform tasks that the bitcoin network can’t, but that make use of the bitcoin blockchain to, for instance, timestamp or validate their work.

One example is Counterparty. Another might be sidechains. Whatever form these overlay networks take, the one thing they have in common is their connection to the bitcoin blockchain, and how they benefit from its network effects to achieve liquidity without having to bootstrap their own alternative cryptocurrency and/or blockchain like alternative solutions such as Ethereum require.

3. Decentralized protocols

Thanks to the blockchain, for the first time we can develop open source, decentralized protocols with built-in data (thanks to overlay networks and the blockchain), validation, and transactions that are not controlled by a single entity. This is where the traditional architecture of software businesses begins to break down. The best example of a decentralized protocol on top of a shared data layer is bitcoin, and we’re already well aware of how it’s affecting money and finance.

Companies like eBay, Facebook and Uber are very valuable because they benefit tremendously from the network effects that come from keeping all user information centralized in private silos and taking a cut of all the transactions.

Decentralized protocols on top of the blockchain have the potential to undo every single part of the stacks that make these services valuable to consumers and investors. They can do this by, for example, creating common, decentralized data sets to which any one can plug into, and enabling peer-to-peer transactions powered by bitcoin.

In fact, a number of promising teams have already begun working on the protocols that will disrupt the business models of the companies above. One example is Lazooz, a protocol for real-time ride sharing and another is OpenBazaar, a protocol for free, decentralized peer-to-peer marketplaces.

4. Open source and commercial APIs

Protocols are hard for the average developer to build on top of, so there’s an opportunity in making it easy to connect to them. Whether it’s a good business in the long term is up for debate, but I think it’s a very important part of the stack.

Making it quick and easy for developers of any skill set to quickly build an application and experiment on top of these decentralized protocols is paramount to their success.

These will be either commercial services or open source projects. Good examples of this trend are Chain's APIs and Coinbase’s Toshi for bitcoin. They both serve the same purpose, but Chain is a hosted, commercial service, and Toshi is open source.

5. Applications

This is the consumer-facing part of the stack. Applications built atop this architecture will, in most cases, work very similarly to the ones we have today – just like Coinbase works similarly to PayPal.

The big difference to consumers, however, is that because they are built on decentralized protocols, they will be able to talk to each other, just like different email applications and bitcoin wallets can interoperate.

One thing I like about this stack is that it’s growing from the bottom up. First we had miners, the blockchain, and bitcoin, and now we’re building everything else on top. As far as I know, the most significant revolutions in technology have been built this way." (http://www.coindesk.com/blockchain-application-stack/)

Business Models

Joel Dietz:

"There are currently a number of incentive structures surrounding blockchain technology and open source software:

(1) Contribute open source code and make money via services (i.e. Peter Todd’s consulting)

(2) Create a new close source software project based on the Bitcoin blockchain with a privately held speculative unit (i.e. legal equity in Coinbase)

(3) Create an new technology set plugged into the Bitcoin blockchain with a privately held speculative unit (i.e. legal equity in Blockstream/Sidechains)

(4) Create an entirely new unit with inherent utility on a new blockchain (BTC in Bitcoin, XRP in Ripple, ETH in Ethereum)

(5) Create an entirely new unit with inherent utility on the Bitcoin blockchain (MSC in Mastercoin, XCP in Counterparty)" (https://medium.com/@Swarm/the-second-wave-of-blockchain-innovation-270e6daff3f5)

Comparing the Incentive Models

Joel Dietz:

"For a long time, the primary model of open source software development has been in category one. The software itself is free. Hosting and other services around it are not. People can also build high value applications on top of the open source code, but these are usually closed source. This is the model that Ruby on Rails and other web frameworks have used fairly successfully as Joel Dietz has previously written.

The second model is the typical business model. In this, the structure of legal equity binds both investors and developers to a future value that may not be realized for several years. This typically creates a group of a few people who are highly committed to a particular outcome, but may naturally come into odds. Historically there is also no way to incentivize any of the parties beyond employees and investors that may also have a vested interest in the platform (i.e. power users).

The third model, by which I primarily refer to Sidechains, is still inchoate. In the Sidechains whitepaper it proposes demurrage as a method for incentivizing sidechain development. This seems to promote exactly the opposite set of incentives than what you would want. Effectively this means that assets on the main chain hold their value, while assets on a sidechain gradually decrease in value, while the difference is basically given away to miners. Also, the Sidechains project has no publicly stated business model, which is also a fairly significant concern. Any potential revenue on a service-based business will never be enough for the venture capitalists to get their necessary return, which basically forces them to either create a closed source product or otherwise leverage their position to “gate keep” and charge some sort of toll on network usage.

The fourth model, though strongly disliked by many, is ironically closest to Bitcoin itself. It states fundamentally that there can be a speculative unit with attached technological innovation that is acquired, and by which the speculators will benefit as both utility and network grows. The somewhat unique feature of Ethereum and a few other related projects (e.g. DarkCoin) is that unlike earlier “altcoins,” these new projects do have significant additional utility that is not found on the Bitcoin Blockchain.

Since all such projects extend the core Bitcoin technology with this additional utility, this effectively makes them competitors to the Bitcoin blockchain. Although early adopters and venture capitalist backers of Bitcoin had the hope that the network effects of Bitcoin would make it something like the TCP/IP protocal of internet money, it is entirely possible that some other competitor will surpass it. I suspect that whether or not this is the case will depend highly on whether or not anyone can make comparable utility and innovation compatible with Bitcoin.

This leads to a fifth model that was perhaps under-appreciated until Ethereum came along. This is the possibility that a metacoin, so called because it works via inserting metadata into Bitcoin transactions, could provide much of the increased utility provided via a smart contracting layer without creating its own blockchain.

Both four and five have very similar economic incentive structures. First of all, they are open to all participants and immediately liquid. Because of this it means that they naturally engage much more quickly a wider audience who are also incentivized to spread the word about that network. But, because of the immediate liquidity, there is no necessary long-term engagement. This affects both the development side and investing, and also means that there a fairly strong incentive to drive up the short time value for a project and exit at the peak. This likely results in a greater amount of capital, greater number of participants, with less depth. While potentially appropriate to the Facebook age, it is typically the case that startups require a few number of very intensely committed people due to the often intensely competitive nature of development, the occasional crisises that test resolve of key participants, and the general need for deferred compensation.

An additional problem is that none of these projects have evolved business models independent of the appreciation of their new asset class. All effectively depend on driving up the price by increasing the underlying utility of the unit and size of their related network, something that, while feasible, remains a questionable choice for anything that expects to be around in 5–10 years. Also, it is quite possible that price appreciation in such an asset is limited relative to the benefits traditionally associated with equity (i.e. 1000x returns on a successful software exit from an early investment). Since venture capital is generally structured as taking high rewards for high risk, projects with capped rewards impossible for them to undertake from an investment perspective.

Another very significant drawback is that even where economic incentives maybe aligned, there are basically no accountability structures due to the basically non-existant legal framework for entities receiving this sort of funding. In this case, Counterparty decided not to take funds whatsoever, whereas Ethereum structured their legal documentation to explicitly state that they were promising nothing in return whatsoever.

As Vitalik recently noted, Ethereum also has a problem of having a dual purpose “product” offering and an “investment” offering, something Swarm founder Joel Dietz called misaligned incentives in an early piece on economics of Ethereum. It is problems like these that have probably caused two out of three Counterparty founders to begin working for a private corporation (Overstock), presumably with some additional equity-based incentivization in addition to the base counterparty unit. In this case, the Counterparty ecosystem now has participants both in categories (4) and (2), with potential conflicts of interest between the participants in area (2), but also the possibility for larger ecosystem growth presuming that those conflicts can adequately be mediated.

So far we have only discussed the advantages and disadvantages of existing economic incentive structures. What about the future? What other possibilities can we expect to emerge?

The first “composite” offering has been proposed by Reddit. This is to take an existing equity offering and distribute the benefits downwards to community users via cryptocurrency. This is an incredible opportunity, because it illustrates one of the key benefits of this ‘open’ incentivization model, it actually directly compensates the community members who contribute to network growth.

The other model is Swarm itself, which, due to legal complexities, was deliberately vague about specific utility at the outset of its fundraising period, and instead described more generally the various categories of benefits that could be applied via these technologies (perk distribution, membership, privileged product access, financial rewards).

This was sometimes described as sort of crypto social-contract with the intention of providing as much value as possible to its users as the legal infrastructure was developed in order to do so. Much of this increased value depended on ability to structure agreements via smart contracts, which was a technology that did not even exist in any usable form until one week ago." (https://medium.com/@Swarm/the-second-wave-of-blockchain-innovation-270e6daff3f5)

Potential Applications

Identity

Morgan Peck:

"So what can you do with a Nakamoto blockchain? The most simple applications, the ones we are likely to see in the near future, will make use of them as basic storage systems that take advantage of the unique properties of the network.

People who are interested in transparency and access are looking at the blockchain as a possible place to organize government records and to include the public in the legislative process, by giving people a forum for publishing, debating, and voting on new proposals.

Because the blockchain gives each entry a rough time stamp, it can also be used as a decentralized notary. Imagine, for example, taking a picture of a dent in your rental car and loading it into a Bitcoin transaction. By looking at what block the transaction went into, you could later prove that the dent existed before you left the parking lot.

Because Bitcoin transactions are secured by strong cryptography, the blockchain can also replace our standard user name–and–password strategy for identity verification. In such a system, a Bitcoin address could be tagged with a user name, while the private key would stand in as a password. Anyone could then ask you to prove your identity by using your private key to solve the same cryptographic puzzle that you would normally solve when making a Bitcoin transaction." (http://spectrum.ieee.org/computing/networks/the-future-of-the-web-looks-a-lot-like-bitcoin)

Censorship

Morgan Peck:

"Nakamoto blockchains also solve the problem of censorship. Once inserted into the chain, metadata cannot be removed. Developers have used this crucial feature to build a new censorship-resistant version of Twitter (called Twister), and a decentralized domain-name registry (Namecoin).

“Everything that we own, everything that we do, is governed by these big piles of records,” says Factom’s Kirby. “A bank is just a big stack of records. An insurance company is just a big stack of records. An economy is basically just a big stack of records. And if you can take this concept of…a giant global accounting ledger and say, ‘Now we can organize all the records in the world this way,’ well, it turns out that’s really exciting.” (http://spectrum.ieee.org/computing/networks/the-future-of-the-web-looks-a-lot-like-bitcoin)

Examples

BY PRIMAVERA DE FILIPPI:

"the blockchain is not limited to monetary applications. Borrowing from the same ideas (though not using the actual peer-to-peer network bitcoin runs on), a variety of new applications have adapted the bitcoin protocol to fulfill different purposes: Namecoin for distributed domain name management; Bitmessage and Twister for asynchronous communication; and, more recently, Ethereum (released only a month ago). Like many other peer-to-peer (P2P) applications, these platforms all rely on decentralized architectures to build and maintain network applications that are operated by the community for the community." (http://www.wired.com/2014/03/decentralized-applications-built-bitcoin-great-except-whos-responsible-outcomes/)

Ethereum

"One of those tapping into its power is Vitalik Buterin, a 19-year-old developer from Toronto, Canada. Last week he launched Ethereum, a new platform that will not just allow for multiple cryptocurrencies, as they are known, but also promises to host a range of decentralised applications on a single block chain. Making systems decentralised is appealing because the authorities will find them hard to shut down.

Initially, Ethereum users will be able to exchange bitcoins for a new currency – ether. Then, ether will be mined just like Bitcoin. But acquiring another form of digital money is not the point. Ethereum is meant to work like an operating system for cryptocurrencies. Developers can create apps, such as social networks or file storage, that sit on Ethereum's network as part of an app store.

Ethereum allows for the creation of complex, yet decentralised, economic tools like financial derivatives, in which two parties can bet on the rise and fall of an asset, or crop insurance that pays out to a farmer according to a weather data feed. Creating decentralised versions of Dropbox or eBay should be possible too, claims Buterin.

Other developers are attempting to achieve the same results by overlaying new code on the existing Bitcoin block chain. One example is the concept of "coloured" coins: with bitcoins labelled to represent other assets such as gold, cars or even houses, you transfer ownership when you trade the labelled coin.

Buterin says Ethereum is much more flexible. "Bitcoin is great as a form of digital money, but its scripting language is too weak for any kind of serious advanced applications to be built on top." (http://www.newscientist.com/article/mg22129553.700-bitcoin-how-its-core-technology-will-change-the-world.html)

Decentralized Autonomous Corporations

"One of the more advanced concepts being touted for a next-generation Bitcoin is the idea of decentralised autonomous corporations (DAC) – companies with no directors. These would follow a pre-programmed business model and are managed entirely by the block chain. In this case the block chain acts as a way for the DAC to store financial accounts and record shareholder votes.

In a way, Bitcoin is actually the first DAC, says Daniel Larimer, a developer in Blacksburg, Virginia. People who own bitcoins are shareholders in the company, which offers financial services, earns revenue through transaction fees and pays a salary to its employees, the miners. But no one is in charge.

Larimer has started his own DAC, called BitSharesX, which he says can perform the actions of a bank, lending other currencies to customers, who can provide BitShares as collateral. Other potential business models for a DAC include election services and lotteries, all run automatically. "The key to a DAC is that it should not depend on any one person." (http://www.newscientist.com/article/mg22129553.700-bitcoin-how-its-core-technology-will-change-the-world.html)

Official Records

Morgan Peck:

"Last year, Manuel Araoz, an Argentinean programmer who now works for BitPay, one of the original Bitcoin payment providers, created a service that enables users to condense any document and embed it into a transaction on the blockchain. A lot of people are now getting excited about the possibility of using this kind of application to store official records. The two examples that come up most often at conferences are property titles and documents proving “prior art” in intellectual property cases. In the case of titles, you’re basically layering a new form of property onto a Bitcoin transaction. Once a deed to a house is associated with a particular value on the Bitcoin blockchain, it can be transferred from party to party without the need for a paper trail.

In the case of prior art, a document embedded in the blockchain would carry with it a rough time stamp (depending on the rate at which new blocks are being added to the chain), which inventors could later use in patent disputes to prove that they had the first claim to an idea. The same solution would extend to any situation where a human notary was necessary.

According to Gavin Andresen, one of the developers who works on the core Bitcoin protocol, these applications could be especially useful for underdeveloped nations where governments lack a good way of tracking and transmitting official documents."

“I think the places where it makes the most sense are the places where they don’t already have a functioning system, they don’t have some legacy way of accomplishing something that the blockchain can help them accomplish,” says Andresen. “The example of property records, deeds to houses. Here in the United States, in Europe, and in other developed world nations, we have this whole system that’s all about keeping track of who owns property and then taxing them. There are parts of the world where that just doesn’t exist yet.” (http://spectrum.ieee.org/computing/networks/the-future-of-the-web-looks-a-lot-like-bitcoin/four-cool-things-you-can-do-with-the-blockchain)

Voting

Morgan Peck:

"There are several groups (Agora, BitCongress, Swarm) that are looking for ways to use the Bitcoin blockchain to enable online voting. Most of the schemes would involve sending a tiny fraction of a specially tagged bitcoin (or a similar token) to every voter. The voter could then sign it over to anyone on a list of candidates. The candidate with the most bitcoins at the end of the vote would win. One of the benefits of a system like this is that voters could divide their votes among candidates. The results are also completely transparent and visible to anyone who has downloaded a copy of the blockchain. On one hand, this is good because you can conduct a public audit of the vote. On the other hand, it opens the door for vote selling.

The BitCongress application, which is still under development, goes further and seeks to carve out a space for all the steps in governance. The group wants to provide a forum for debate, a process for voting, and a place for representatives to publish legislative proposals, all on the Bitcoin blockchain." (http://spectrum.ieee.org/computing/networks/the-future-of-the-web-looks-a-lot-like-bitcoin/four-cool-things-you-can-do-with-the-blockchain)

Identity Verification

Morgan Peck:

"Today, when we need to log on to websites or applications, we usually prove our identities by supplying passwords. As a result, we are accustomed to managing many different passwords on many different websites. We are also trusting these Web services to keep our passwords, and therefore our identities, safe.

Onename uses the blockchain to link your name to a Bitcoin address, which you can then prove you control by signing a digital message with your private key (similar to what you do when you spend bitcoins). The developers describe the service as a universal passport for the Internet. They imagine that in the future, instead of signing in to applications with a Facebook account, we will refer to a Onename identity stored on the blockchain.

For example, “If you want to release your medical records to an application, it is important that you are in unique control of your medical records. You’re not going to trust Facebook,” says Ryan Shea, the cofounder of Onename. “This can even be extended to things like authorizing access to your home, opening your garage door, really any action that is tied to identity. So you could see this being used anywhere on the Web where identity is required.”

In this scenario, you never have to reveal your private key to anyone, and you retain complete control over (and responsibility for) the integrity of your online identity." (http://spectrum.ieee.org/computing/networks/the-future-of-the-web-looks-a-lot-like-bitcoin/four-cool-things-you-can-do-with-the-blockchain)

Distributed Domain-Name Server

Morgan Peck:

"Namecoin is an altcoin that was established in 2011. The code is nearly identical to that of Bitcoin, but it uses its own Nakamoto blockchain. Rather than tracking financial transactions, it records domain names and their corresponding IP addresses to provide a more secure, censorship-resistant alternative to the way we usually access websites on the Internet.

When you type a conventional URL (like Spectrum.ieee.org) into a browser, you rely on a centralized third party, called a domain-name server, to look up the URL in a directory and find the numerical IP address of the server you want to connect to. When the U.S. government wants to disable a website, one easy way is for it to demand that the domain-name server, or DNS, refuse to resolve the offending URL. In this case, even though the IP address you want is sitting there in a database on its server, the DNS sends you to a Digital Millennium Copyright Act website takedown notice instead of routing you to your destination. Because the databases are centralized, they are also good targets for hackers. If an attacker can manage to either change an IP address in the directory or send you a false one, he can divert your traffic toward a nefarious website.

Namecoin was created to solve both of these problems. With a Namecoin client, you can look up any .bit URL and be sure that the corresponding IP address is the same as the one that originally registered it.

“With Nakamoto blockchains, it’s very, very difficult to remove data from the blockchain once it’s already in there. And it’s not really feasible to insert fraudulent data that claims to be from an address that it really isn’t,” says Jeremy Rand, one of the Namecoin developers. “What this means is, if I register a name in the Namecoin blockchain, no one else can reverse that transaction and remove it from the blockchain, and no one else can hijack it.” (http://spectrum.ieee.org/computing/networks/the-future-of-the-web-looks-a-lot-like-bitcoin/four-cool-things-you-can-do-with-the-blockchain)

History

Joel Dietz:

" The Second Wave of Blockchain Innovation

The last months have included intense discussion on the feasibility and desirability of various economic forms of Blockchain innovation, including the ominous title of an article in Techcrunch, “A Bitcoin Battle is Brewing.” Although they contain many of the same principles that made Bitcoin successful, other digital assets have often been criticized and dismissed as “speculative.” However, recent usages of cryptoledger systems (c.f. “appcoins,” cryptoequity, smart contracts) often include substantial technological innovation and can be used to solve long standing problems both in investment and corporate governance.

History

In the mid-90s Nick Szabo, the inventor of smart contracts, noted the many fascinating things that could be done with programmable money. Another one of his best ideas, “Bit gold,” was later implemented as Bitcoin, a distributed network with unique incentivization mechanism for growth. It included a rudimentary scripting language that allowed you to send a unit, a “coin,” to another participant in the network. This was enough for it to rise in value from mere pennies to a high of over $1,000.

In 2013 J.R. Willet drafted “Second Bitcoin Whitepaper” and proposed that the Bitcoin blockchain be extended with more advanced smart contract capability, encoded via metadata. His proposed way to finance the development of this new functionality was to create a new type of token that gave access to these advanced features. This was called the “Master” coin.

J.R. sold $600,000 worth of Mastercoins for Bitcoins in the first ever “crowdsale” in the summer of 2013. By the end of that calendar year, they had appreciated 74x in value. Investors rejoiced. But not all was well in the world of Mastercoin. Instead of full-time developers crunching away in hope of some future event, founders weren’t working full time and most people were employed via “bounties.” All of the best developers interested in the idea were quietly drifting away from the project. These notably included Vitalik Buterin and Adam Krellenstein, both of whom would attempt to solve the same problem in their own way.

In early 2014, Adam Krellenstein, a self taught programmer, created a re-implementation of the Mastercoin idea from scratch. Like Mastercoin, it contained an implementation of certain smart contract ideas, primarily implementations of existing financial tools. This included asset issuance, asset trading, dividends, and betting. It was released as Counterparty and approximately $1.5mm worth of Bitcoin were transferred into this new system.

Around the same time, Vitalik Buterin developed the first proof of concept of Ethereum, an abstraction of the same idea. Instead of programming the specific desired features of smart contracts, Vitalik proposed creating a toolkit that allows anyone to program their own smart contract. While theoretically possible to implement in a similar context on the Bitcoin blockchain, Vitalik believed that there were many other aspects of Blockchain architecture that could be improved, including file storage, clearing times, and proofing against special hardware. Vitalik initiated his own crowdsale to finance this blockchain, which gathered approximately $15mm worth of Bitcoins.

As numerous other projects followed a similar model for funding in 2014, including Counterparty, Maidsafe, Storj, Supernet, Gems, and SWARM, there was a precipitous decline in the value of the progenitor. Mastercoins returned from a peak of almost 100 times return on investment to a price close to the original sale." (https://medium.com/@Swarm/the-second-wave-of-blockchain-innovation-270e6daff3f5)

Discussion

Zacqary Adam Green:

"Bitcoin’s real contribution to the world is its source code. The blockchain, the network protocol, the cryptographic verification — anyone can take this and build a currency with any economic properties their community needs. I’m not convinced that bitcoin’s Austrian School properties can sustain a global (or even local) economy, but you know what? That’s okay. If I ever feel the bitcoin economy has become too unequal, unbalanced, or stagnant, it’s now trivial for me to start my own damn currency.

A single bitcoin belongs is a measurement like a centimeter, but the bitcoin community is a social network. People use bitcoin because other people they trade with use bitcoin. If my town is running low on bitcoin but has a lot of resources to share internally, we can create our own local currency to free up bitcoin for importing and exporting. Or I could join an online network of artists who work on one another’s projects, and we’d create our own internal currency that plays by whatever rules we need it to.

There is no perfect monetary system for every situation. Bitcoin is not going to be the one world currency, and it doesn’t need to be. A lot of people compare Bitcoin to the Internet, but it’s more like CompuServe. It’s the first of many digital, non-state currencies to come, that will all interoperate with each other in ways we can’t even dream of yet." (http://falkvinge.net/2013/11/06/bitcoins-real-revolution-isnt-hard-money-its-economic-panarchy/ )

From the Invisible Hand to the Visible Hand

Morgan Peck:

A Nakamoto blockchain, then, becomes more secure as more people participate in the network. But why would they? In the case of Bitcoin, it’s because they are paid to do it. Every time a block gets solved, a virgin transaction is created with a handful of newly minted bitcoins signed over to the first miner who completed the work.

In old security models, you tried to lock out all of the greedy, dishonest people. Bitcoin, on the other hand, welcomes everyone, fully expecting them to act in their own self-interest, and then it uses their greed to secure the network.

“This is, I think, the main contribution,” says Ittay Eyal, a computer scientist at Cornell who studies Bitcoin along with other decentralized networks. “Bitcoin causes an attacker to be better off by playing along than by attacking it. The incentive system leads a lot of people to contribute resources toward the welfare of the system.”" (http://spectrum.ieee.org/computing/networks/the-future-of-the-web-looks-a-lot-like-bitcoin)

Disintermediating Banking and User Accounts

Noah Thorp:

"The revolution in progress can generally be described as “disintermediation”. It is the transference of trust, data, and ownership infrastructure from banks and businesses into distributed peer to peer network protocols.

A distributed “world wide ledger” is one of several technologies transforming our highly centralized structures. This technology, cryptically named the “block chain” is embodied in several distributed networks such as Bitcoin, Eris Industries DB, and Ethereum.

Through an encrypted world wide ledger built on a block chain, trust in the systems maintained by third party human institutions can be replaced by trust in math. In block chain systems, account identity and transactions are cryptographically verified by network “consensus” rather than by trust in a single third party.

Currencies are not the only assets that can be traded on block chain protocols. Distributed user accounts are the most basic element of the cryptographic network infrastructure. The next wave of innovation is in the transference of asset ownership of all types.

For example, ColoredCoins can be used to distribute asset ownership information via meta-data associated with low cost bitcoin transactions. In practice, ColoredCoins are used to represent and trade fractional ownership of art on Artlery.com and profit sharing rights of co-authored code at Assembly.com. Although ColoredCoins leverage the bitcoin protocol, other block chains authored by Stellar, Eris Industries, and Ethereum are quickly gaining momentum to offer similar functionality.

Whereas block chain protocols decentralize transactions, encrypted peer to peer file sharing networks promise to remove the need for centralized databases. In this area technologies like Inter Planetary File System (IPFS) and Maidsafe represent the edge of the innovating wave.

The world looks different when you combine distributed ledgers, file systems, cryptographic trust, and financial transactions. In this world interpersonal human trust is still essential — but opportunities for corruption are reduced.

As our infrastructure shifts, our broad stroke categorization of libertarian, socialist, and capitalist systems is under heavy strain. Republican pot growers will leverage crypto currency to provide protections that banks are afraid to provide. Intentional communities and cooperatives will embrace cryptographically enabled equity structures to power “off the grid” solar energy markets using financial instruments previously wielded exclusively by venture capitalists.

The protocol shift towards decentralization is revitalizing the libertarian, collaborative, and self-organizing memes that circulated at the dawn of the internet revolution. As the sharing economy enables peer to peer transactions of underutilized assets at scale, cooperatives are cool again. Holacracy and co-working memes have become water cooler conversations instead of fringe encampments. This contemporary ecology grows on the rich meme humus of Norbert Wiener (Cybernetics), John Perry Barlow (EFF), Dee Hock (Visa’s chaordic founder), Kevin Kelly, Stuart Brand, Howard Rheingold, The Whole Earth Catalogue, The Well, Wired Magazine, Burning Man’s 10 Principles, and the Long Now Foundation.

...

There are a couple important words for understanding these new structures. Let’s review them.

“Autonomous” means running on its own without intervention. A web hosted weather prediction service could run with minimal intervention. Self-driving cars are also autonomous.

“Smart contracts” are like spreadsheet scripts for a distributed ledger. Where a block chain defines the distributed immutable ledger of transactions, smart contract scripts define programmatic actions that will be triggered by block chain transactions. Smart contracts can legally signify buying and selling of equity, voting, and entering into contracts.

The earliest breakthroughs in merging block chains and smart contracts is promised by the Ethereum Foundation. Ethereum raised over $15 million in the second largest crowd equity fund to date. Their solution provides the first full featured programming environment that runs distributed applications on a block chain.

Imagine that you created a lightweight corporation that automates all of its contract signing, profit distribution, and financial transactions. This entity stores its data and executes its code on a distributed peer to peer network. It is “autonomous” because it can run on its own after setup. It manages its bank account and transactions via a distributed network such as Bitcoin. Its accounts are owned by a corporate legal entity registered with the state, but it has no employees. Surprise, you just invented a Distributed Autonomous Corporation (DAC).

The first Distributed Autonomous Corporations (DACs) are likely to be escrow and gambling services. As we bring more of science fiction into being, DACs may control financial decision making for self-driving car rentals, drone services, personal internet of things networks, and unmanned corporations. Consider: Foxconn, the world’s largest Chinese manufacturer, is manufacturing 30k robots per year; the CEO of Baidu has proposed a state level Chinese initiative to develop AI in an effort similar to the Apollo Space program. The smarter smart contract code becomes the more autonomous organizational decision making will occur.

The biggest concern is one of control. Distributed or not, autonomous entities will make many decisions representing trade offs of value. It’s not a question of if machines will make decisions for us, it’s a question of what decisions and under what conditions. For instance, if a self-driving car has a choice of crashing into a school bus or driving the passengers off a cliff which should it choose? Programmers are coding ethical decisions like this at this very moment.

As David Nordfors, chair of the Innovation For Jobs Summit says “If we care more about tasks than about people, then tech will replace people. If we care more about people than about tasks, then tech will leverage people.” There are many ways in which technological innovation can disrupt unemployment and machines can work for society rather than society for machines — but we have to want that.

A new legal and technological entity called a Distributed Collaborative Organization represents a new way of organizing multi-stakeholder cooperatives at scale. Could the difference between dystopia and protopia pivot on the structure of ownership?

...

Imagine regularly entering into ad hoc equity relationships with hundreds of collaborators. Distributed Collaborative Organizations (DCOs) are an example of collective peer to peer ownership suitable for ecosystems of stakeholders. Legal innovations for DCOs, pioneered by companies like Swarm.Fund, use carefully crafted legal structures to enable crowd funded investment in portfolios of private companies by non-accredited investors. The sociological outcome is the empowerment of multi stakeholder cooperatives at scale.

Meanwhile, dynamic governance structures are evolving to compliment the unboxing of collaboration into dynamic equity arrangements. These newly ascendant species of dynamically governed entities include Holacracy, Sociocracy, Podulism, and the working practices of SEMCO, Gore, Valve, and Morning Star.

Dynamic governance systems still have not fully related to the emerging crypto economic layer. However, distributed peer to peer networks, adaptive organizations, and currency protocols are co-evolving." (https://medium.com/@noahthorp/how-society-will-be-transformed-by-crypto-economics-b02b6765ca8c)

Why the Bitcoin ledger is potentially so important

Brett Scott:

"Banks are information intermediaries. Gone are the days of the merchant dumping a hoard of physical gold into the vaults for safekeeping. Nowadays, if you have ‘£350 in the bank’, it merely means the bank has recorded that for you in their data centre, on a database that has your account number and a corresponding entry saying ‘350’ next to it. If you want to pay someone electronically, you essentially send a message to your bank, identifying yourself via a pin or card number, asking them to change that entry in their database and to inform the recipient’s bank to do the same with the recipient’s account.

Thus, commercial banks collectively act as a cartel controlling the recording of transaction data, and it is via this process that they keep score of ‘how much money’ we have. To create a secure electronic currency system that does not rely on these banks thus requires three interacting elements. Firstly, one needs to replace the private databases that are controlled by them. Secondly, one needs to provide a way for people to change the information on that database (‘move money around’). Thirdly, one needs to convince people that the units being moved around are worth something.

To solve the first element, Bitcoin provides a public database, or ledger, that is referred to reverently as the blockchain. There is a way for people to submit information for recording in the ledger, but once it gets recorded, it cannot be edited in hindsight. If you’ve heard about bitcoin ‘mining’ (using ‘hashing algorithms’), that is what that is all about. A scattered collective of mercenary clerks essentially hire their computers out to collectively maintain the ledger, baking (or weaving) transaction records into it.

Secondly, Bitcoin has a process for individuals to identify themselves in order to submit transactions to those clerks to be recorded on that ledger. That is where public-key cryptography comes in. I have a public Bitcoin address (somewhat akin to my account number at a bank) and I then control that public address with a private key (a bit like I use my private pin number to associate myself with my bank account). This is what provides anonymity.

The result of these two elements, when put together, is the ability for anonymous individuals to record transactions between their bitcoin accounts on a database that is held and secured by a decentralised network of techno-clerks (‘miners’).

...

A deeper movement is developing. It focuses not only on Bitcoin’s potential to disrupt commercial banks, but also on the more general potential for decentralised blockchains to disrupt other types of centralised information intermediaries.

Copyright authorities, for example, record people’s claims to having produced a unique work at a unique date and authoritatively stamp it for them. Such centralised ‘timestamping’ more generally is called ‘notarisation’. One non-monetary function for a Bitcoin-style blockchain could thus be to replace the privately controlled ledger of the notary with a public ledger that people can record claims on. This is precisely what Proof of Existence and Originstamp are working on.

And what about domain name system (DNS) registries that record web addresses? When you type in a URL like www.e-ir.info, the browser first steers you to aDNS registry like Afilias, which maintains a private database of URLs alongside information on which IP address to send you to. One can, however, use a blockchain to create a decentralised registry of domain name ownership, which is what Namecoin is doing. Theoretically, this process could be used to record share ownership, land ownership, or ownership in general (see, for example, Mastercoin’s projects).

The biggest information intermediaries, though, are often hidden in plain sight. What is Facebook? Isn’t it just a company that you send information to, which is then stored in their database and subsequently displayed to you and your friends? You log in with your password (proving your identity), and then can alter that database by sending them further messages (‘I’d like to delete that photo’). Likewise with Twitter, Dropbox, and countless other web services.

Unlike the original internet, which was largely used for transmission of static content, we experience sites like Facebook as interactive playgrounds where we can use programmes installed in some far away computer. In the process of such interactivity, we give groups like Facebook huge amounts of information. Indeed, they set themselves up as information honeytraps in order to create a profit-making platform where advertisers can sell you things based on the information. This simultaneously creates a large information repository for authorities like the NSA to browse. This interaction of corporate power and state power is inextricably tied to the profitable nature of centrally held data.

But what if you could create interactive web services that did not revolve around single information intermediaries like Facebook? That is precisely what groups like Ethereum are working towards. Where Bitcoin is a way to record simple transaction information on a decentralised ledger, Ethereum wants to create a ‘decentralised computational engine’. This is a system for running programmes, or executing contracts, on a blockchain held in play via a distributed network of computers rather than Mark Zuckerberg’s data centres.

It all starts to sounds quite sci-fi, but organisations like Ethereum are leading the charge on building ‘Decentralised Autonomous Organisations’, hardcoded entities that people can interact with, but that nobody in particular controls. I send information to this entity, triggering the code and setting in motion further actions. As Bitshares describes it, such an organisation “has a business plan encoded in open source software that executes automatically in an entirely transparent and trustworthy manner.”" (http://furtherfield.org/features/articles/visions-techno-leviathan-politics-bitcoin-blockchain)

The Revolution will not be based on a global receipt depository!

Alan Avans:

You don't have to be an expert to see that the basic banking software, B2B trading software, corporate treasury stations etc. have been available in largely off-the-shelf form for almost three decades And more if you count that time when ERP existed as a conceptual glint in SAP's eye before it took on the frankenstein discombobulation surrounding legacy systems and siloed business processes.

Creditary relations are social relations, and this is something that in one way or another those who choose to weigh their anchor in the Blockchain continually miss. The kind of horizontal creditary relations that would conform to standards of P2P-edness, being social relations, require social organization and the very opposite of anonymity. What is required is a way to build the road as one travels, and I suspect that road will not lead to the Blockchain, much less be a fork in the Blockchain.

I do not believe that the Blockchain is useless. It's just no place to anchor a currency since ultimately the resiliency of a creditary system is predicated on agreed definitions of creditworthyness and access to (but not necessarily ownership of) productive capacity. Receipts are not credit and receipts cannot serve as a basis for currency without duplicating much the same relation as exists between the horizontal and vertical relations that exist between governments, central banks and the commercial banking sector today. The highest and best use of a receipt is that of a spent ticket or of a cleared invoice."

(fb, January 2015)

The Political Vision behind the ledger

Brett Scott:

"When asked about why Bitcoin is superior to other currencies, proponents often point to its 'trustless' nature. No trust needs be placed in fallible ‘governments and corporations’. Rather, a self-sustaining system can be created by individuals following a set of rules that are set apart from human frailties or intervention. Such a system is assumed to be fairer by allowing people to win out against those powers who can abuse rules.

The vision thus is not one of bands of people getting together into mutualistic self-help groups. Rather, it is one of individuals acting as autonomous agents, operating via the hardcoded rules with other autonomous agents, thereby avoiding those who seek to harm their interests.

Note the underlying dim view of human nature. While anarchist philosophers often imagine alternative governance systems based on mutualistic community foundations, the ‘empowerment’ here does not stem from building community ties. Rather it is imagined to come from retreating from trust and taking refuge in a defensive individualism mediated via mathematical contractual law.

It carries a certain disdain for human imperfection, particularly the imperfection of those in power, but by implication the imperfection of everyone in society. We need to be protected from ourselves by vesting power in lines of code that execute automatically. If only we can lift currency away from manipulation from the Federal Reserve. If only we can lift Wikipedia away from the corruptible Wikimedia Foundation.

Activists traditionally revel in hot-blooded asymmetric battles of interest (such as that between StrikeDebt! and the banks), implicitly holding an underlying faith in the redeemability of human-run institutions. The Bitcoin community, on the other hand, often seems attracted to a detached anti-politics, one in which action is reduced to the binary options of Buy In or Buy Out of the coded alternative. It echoes consumer notions of the world, where one ‘expresses’ oneself not via debate or negotiation, but by choosing one product over another. We’re leaving Earth for Mars. Join if you want.

It all forms an odd, tense amalgam between visions of exuberant risk-taking freedom and visions of risk-averse anti-social paranoia. This ambiguity is not unique to cryptocurrency (see, for example, this excellent parody of the trustless society), but in the case of Bitcoin, it is perhaps best exemplified by the narrative offered by Cody Wilson in Dark Wallet’s crowdfunding video. “Bitcoin is what they fear it is, a way to leave… to make a choice. There’s a system approaching perfection, just in time for our disappearance, so, let there be dark”.

...

But where exactly is this perfect system Wilson is disappearing to?

Back in the days of roving bands of nomadic people, the political option of ‘exit’ was a reality. If a ruler was oppressive, you could actually pack up and take to the desert in a caravan. The bizarre thing about the concept of ‘exit to the internet’ is that the internet is a technology premised on massive state and corporate investment in physical infrastructure, fibre optic cables laid under seabeds, mass production of computers from low-wage workers in the East, and mass affluence in Western nations. If you are in the position to be having dreams of technological escape, you are probably not in a position to be exiting mainstream society. You are mainstream society.

Don’t get me wrong. Wilson is a subtle and interesting thinker, and it is undoubtedly unfair to suggest that he really believes that one can escape the power dynamics of the messy real world by finding salvation in a kind of internet Matrix. What he is really trying to do is to invoke one side of the crypto-anarchist mantra of ‘privacy for the weak, but transparency for the powerful’.

That is a healthy radical impulse, but the conservative element kicks in when the assumption is made that somehow privacy alone is what enables social empowerment. That is when it turns into an individualistic ‘just leave me alone’ impulse fixated with negative liberty. Despite the rugged frontier appeal of the concept, the presumption that empowerment simply means being left alone to pursue your individual interests is essentially an ideology of the already-empowered, not the vulnerable.

This is the same tension you find in the closely related cypherpunk movement. It is often pitched as a radical empowerment movement, but as Richard Boase notes, it is “a world full of acronyms and codes, impenetrable to all but the most cynical, distrustful, and political of minds.” Indeed, crypto-geekery offers nothing like an escape from power dynamics. One merely escapes to a different set of rules, not one controlled by ‘politicians’, but one in the hands of programmers and those in control of computing power.

It is only when we think in these terms that we start to see Bitcoin not as a realm ‘lacking the rules imposed by the state’, but as a realm imposing its own rules. It offers a form of protection, but guarantees nothing like ‘empowerment’ or ‘escape’.

Technology often seems silent and inert, a world of ‘apolitical’ objects. We are thus prone to being blind to the power dynamics built into our use of it. For example, isn’t email just a useful tool? Actually, it is highly questionable whether one can ‘choose’ whether to use email or not. Sure, I can choose between Gmail or Hotmail, but email’s widespread uptake creates network effects that mean opting out becomes less of an option over time. This is where the concept of becoming ‘enslaved to technology’ emerges from. If you do not buy into it, you will be marginalised, and thatis political.

This is important. While individual instances of blockchain technology can clearly be useful, as a class of technologies designed to mediate human affairs, they contain a latent potential for encouraging technocracy. When disassociated from the programmers who design them, trustless blockchains floating above human affairs contains the specter of rule by algorithms. It is a vision (probably accidently) captured by Ethereum’s Joseph Lubin when he says “There will be ways to manipulate people to make bad decisions, but there won’t be ways to manipulate the system itself”.

Interestingly, it is a similar abstraction to that made by Hobbes. In his Leviathan, self-regarding people realise that it is in their interests to exchange part of their freedom for security of self and property, and thereby enter into a contract with aSovereign, a deified personage that sets out societal rules of engagement. The definition of this Sovereign has been softened over time – along with the fiction that you actually contract to it – but it underpins modern expectations that the government should guarantee property rights.

Conservative libertarians hold tight to the belief that, if only hard property rights and clear contracting rules are put in place, optimal systems spontaneously emerge. They are not actually that far from Hobbes in this regard, but their irritation with Hobbes’ vision is that it relies on politicians who, being actual people, do not act like a detached contractual Sovereign should, but rather attempt to meddle, make things better, or steal. Don’t decentralised blockchains offer the ultimate prospect of protected property rights with clear rules, but without the political interference?

This is essentially the vision of the internet techno-leviathan, a deified crypto-sovereign whose rules we can contract to. The rules being contracted to are a series of algorithms, step by step procedures for calculations which can only be overridden with great difficulty. Perhaps, at the outset, this represents, à la Rousseau, the general will of those who take part in the contractual network, but the key point is that if you get locked into a contract on that system, there is no breaking out of it.

This, of course, appeals to those who believe that powerful institutions operate primarily by breaching property rights and contracts. Who really believes that though? For much of modern history, the key issue with powerful institutions has not been their willingness to break contracts. It has been their willingness to use seemingly unbreakable contracts to exert power. Contracts, in essence, resemble algorithms, coded expressions of what outcomes should happen under different circumstances. On average, they are written by technocrats and, on average, they reflect the interests of elite classes.

That is why liberation movements always seek to break contracts set in place by old regimes, whether it be peasant movements refusing to honour debt contracts to landlords, or the DRC challenging legacy mining concessions held by multinational companies, or SMEs contesting the terms of swap contracts written by Barclays lawyers. Political liberation is as much about contesting contracts as it is about enforcing them." (http://furtherfield.org/features/articles/visions-techno-leviathan-politics-bitcoin-blockchain)

The Bitcoin Protocol Is More ‘Cloud’ Than ‘P2P’

BY PRIMAVERA DE FILIPPI:

"For many, bitcoin — the distributed, worldwide, decentralized crypto-currency — is all about money … or, as recent events have shown, about who invented it. Yet the actual innovation brought about by bitcoin is not the currency itself but the platform, which is commonly referred to as the “blockchain” — a distributed cryptographic ledger shared amongst all nodes participating in the network, over which every successfully performed transaction is recorded.

And the blockchain is not limited to monetary applications. Borrowing from the same ideas (though not using the actual peer-to-peer network bitcoin runs on), a variety of new applications have adapted the bitcoin protocol to fulfill different purposes: Namecoin for distributed domain name management; Bitmessage and Twister for asynchronous communication; and, more recently, Ethereum (released only a month ago). Like many other peer-to-peer (P2P) applications, these platforms all rely on decentralized architectures to build and maintain network applications that are operated by the community for the community. (I’ve written before here in WIRED Opinion about one example, mesh networks, which can provide an internet-native model for building community and governance).

Thus, while they enable a whole new set of possibilities, blockchain-based applications also present legal, technical, and social challenges similar to those raised by other P2P applications that came before them, such as BitTorrent, Tor, or Freenet. But some of these challenges haven’t been seen before in the context of traditional P2P networks.

Although all blockchain-based applications are based on a decentralized network architecture, most of these applications distinguish themselves from standard P2P applications in at least two ways:

Users’ data (including personal data) are not stored locally into users’ devices. They subsist “in the cloud”, in the sense that they are hosted in a distributed database — the blockchain in this case — that is shared amongst all users in the network. This means that data is ubiquitous: It can be accessed at anytime and from anywhere, regardless of the user’s device. But the data is also more transparent: All actions or transactions performed by users are recorded on the blockchain and thus publicly available to everyone (although the identity of users can be kept secret and the content of such transactions can of course be encrypted).

Instead of being run locally, blockchain-based applications operate globally. They are deployed on the blockchain itself and are run — in a distributed manner — by relying on the resources provided by all users connected to the network. Although each client runs locally on the user’s device, these applications are constantly available, even when individual devices are turned off (as long as there are enough resources dedicated to them).

In this sense, blockchain-based applications are — in spite of their inherently decentralized nature — more similar to cloud-based services than traditional P2P applications.

However, these applications do significantly differ from traditional cloud-computing applications in that they are autonomous and independent from any central server or authority in charge of regulating or managing the network. Applications are run through an aggregate of individual, peer-to-peer clients that contribute their own resources to the network. In addition to being autonomous, the network is also more resilient and anonymous: no single point of failure, no single point of control.

We need to make sure we don’t exchange the tyranny of large online operators for the “tyranny of code” instead. As such, the bitcoin platform (or blockchain) allows for the deployment of decentralized applications that combine the benefits of cloud computing — in terms of ubiquity and elasticity — with the benefits of P2P technologies in terms of privacy and anonymity. Even though the blockchain is inherently transparent (as every transaction is recorded on a public ledger), users can have multiple identities that don’t necessarily relate to their real persona.

Blockchain-based applications can therefore address user’s privacy through anonymity." (http://www.wired.com/2014/03/decentralized-applications-built-bitcoin-great-except-whos-responsible-outcomes/)

What Are the Challenges?

BY PRIMAVERA DE FILIPPI:

"In general, most challenges encountered by decentralized network applications are related to the limited availability of resources and the inherent difficulty of managing and coordinating them.

Long-term sustainability can only be achieved by providing an incentive for users to contribute to the network — for altruistic to selfish reasons — so that there are always a sufficient amount of resources available at any given time. In the case of decentralized applications featuring a specifically designed credit system (such as bittorrent) or assuming the function of a cryptocurrency (such as bitcoin, namecoin, and ethereum), this objective is much easier to achieve to the extent that these platforms provide an additional economic and/or utilitarian incentive for users to contribute to the overall operations of the network.

But blockchain-based applications raise important legal challenges, too. The challenges similar to those raised by traditional P2P networks is that the anonymity inherent in these networks supports or even encourages criminal behaviors and other illicit or reprehensible activities.

In previous decentralized networks, these issues were dealt with by establishing shared or distributed liability amongst all users connected to the network. Even though it’s often difficult to determine identity and assess the degree of responsibility each should be held accountable for, there are always specific individuals to blame. (Ultimately, the difficulty lies in assigning more or less responsibilities to one or more users in the network.)

So what happens when the figure of the “user” itself disappears; when the resulting P2P applications live outside a central authority? Who is liable and accountable? While we can borrow lessons learned from the world of previous P2P applications to respond to some of these challenges, it cannot be denied that blockchain-based applications raise new and important legal issues — and of a completely different kind than those found in traditional P2P architectures." (http://www.wired.com/2014/03/decentralized-applications-built-bitcoin-great-except-whos-responsible-outcomes/)

Towards an internet of (block)chains

John Robb:

"The future of the Internet is a confederation of chains.

Chains that'll do almost everything.

Chains that act like companies (without any of that "organic and financial overhead" that costs us so much).

Chains that cut across borders.

Chains for closed social networks. Chains for virtual legal systems. Chains for industries...

Even chains for global insurgencies and alternative economies (the topic of my new book).

Lots of chains.

It's inevitable at this point. Bitcoin was simply the plausible promise of what was possible with this tech.

I'm also getting a very good feel for how this is going to roll out and what I'm seeing is pretty cool.

How so?

The rollout of these blockchains is going to be full on creative destruction.

Chains will generate or control more wealth in the next two decades than the world has produced since inception.

They also enable us to destroy wealth with equal alacrity by allowing us to shift our thinking on what we consider valuable (to the old and currently wealthy --> you are toast). " (http://globalguerrillas.typepad.com/globalguerrillas/2014/10/the-internet-of-chains.html)

The Blockchain Applications Directory=

Compiled by Aeze Soo:

La Zooz

- Social Ride sharing :

→ https://www.youtube.com/watch?v=0BttJsLLOHo

→ LaZooz.org

" La’Zooz: The Decentralized, Crypto-Alternative to Uber [3]

Backfeed

Backfeed develops foundational tools for Decentralized Collaborative Organizations, syncing the spontaneous actions of millions of people to promote an era of collaboration and decentralized value production.

→ http://backfeed.cc