IBM Exec Elected Chair of Hyperledger Technical Committee

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An IBM executive has been elected as the chair of the technical advisory committee to the Linux Foundation-led Hyperledger blockchain project.

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Silk Road Vendors PlutoPete and RichieRich Sentenced to 5 Years

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According to the British NCA: One of the Silk Road’s most renowned British vendors and his business partner have been sentenced to a total of ten years after an NCA investigation uncovered the buying and selling of a catalogue of illegal drugs, including crack cocaine and methamphetamine. The pair publically claimed they were running a legitimate business selling legal highs.

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Peter Ward, a self-proclaimed ‘psychonaut’, was known online as PlutoPete. His business specialised in supplying military-grade foil packaging that claimed to hide illegal materials from detection. He also provided new psychoactive substances, commonly referred to as legal highs, and drug paraphernalia.

Ward was arrested by NCA officers in Barnstaple, North Devon in October 2013 following an international operation targeting prominent vendors on Silk Road II.

Officers searched Ward’s rural home and found class A and B drugs and numerous computers. They also seized thousands of Post Office receipts with customer details.

Forensics analysis of the machines revealed extensive online activity, with 5,235 sales over two years.

The majority of sales related to legal items, but 54 transactions related to Class A and B drugs. Ward had also been sending ‘care packages’ of drugs hidden on blotter paper into prisons.

Analysis uncovered his close working with an ex-customer, Richard Hiley, who was commissioned by Ward to convert Bitcoins into cash.

In December 2013, NCA officers raided Hiley’s address in Oldbury, West Midlands, after financial records seized from Ward identified large scale transactions between the pair. Hiley’s computers and digital devices had messages from three separate Silk Road accounts named RichieRich, happyman and BITCOINS, which detailed 242 transactions related to the sale of cocaine, cannabis and methamphetamine.

2013-06-24-  RichieRich (Hiley) to realbrandnew re: rules…“just ordered 50grams of meth so we can really sell it you can do hole g’s, half’s and 150mg bits and il do 3.5, 5, 7 and 14g’s listings its getting expressed from the states so will be 4-5 days il send you 10 grams when it comes and you can pay it off once you sell it.”

The message logs also detailed how quickly Hiley’s business grew to a size where he began employing people to run the accounts.

21/07/2013 – “Bitcoins (Hiley)to PlutoPete “im so behind I brang matt to answer messages and I have a new girl who is doing 4hrs a day and made a contact in London who might buy happyman off me for a lump sum and a commsion, I have 66 messages and 28 orders witting here the more messages I answer the more they reply and keep on building….just got 14g of meth and the load from the company still to sell but had a good night in London but now need a team of helpers”

Messages recovered also highlighted the potential damage done by the drugs that Hiley was selling over the dark web marketplace.

09/07/2013 – LongRiver to happyman (Hiley) re: subject Hello, How to say it… I spent three week in hospital; the stuff was not good for my body. I fail to die. Are you sure of the quality of your production..”

Ward and Hiley pleaded guilty to 13 charges relating to the possession, supply and importation of Class A and B drugs. Hiley additionally pleaded guilty to two counts of importing a prohibited weapon after he imported five stun guns, claiming that they were for personal protection.

The pair were sentenced at Birmingham Crown Court on 29 February to five years and two months  and five years  respectively.

Ian Glover, NCA Branch Commander, said:

“Criminals and their customers like to think that dark web market places provide an anonymous haven.

“The reality is that law enforcement works together internationally to identify and pursue these people.

“As in Ward’s case, dealers often don’t take any care in handling personal details of customers. We are working with our law enforcement  partners to further identify and pursue those  illegally trading in drugs and firearms online.”

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‘Bitcoin Always Needed More Than One Body of Developers’: An Interview With Libbitcoin’s Eric Voskuil

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Launched in 2011 by an ensemble of dedicated open-source developers led by Bitcoin’s rebellious hacker Amir TaakiLibbitcoin was born a tool of resistance. 

Offering an alternative to the original Bitcoin client, its goal was to diversify the Bitcoin development ecosystem, ensuring no single development team retained effective control over the network. “Centralized software is vulnerable to the dictates of whoever controls development of that software code, and any dictates pressured onto them,” Taaki’s Libbitcoin manifesto reads.

Five years later, Taaki has vanished from the Bitcoin scene. But Libbitcoin, a set of cross-platform, open-source libraries that serve as building blocks for a variety of Bitcoin applications, continues to grow. They are now maintained by a loosely tied team led by Seattle-based software architect and former naval aviator Eric Voskuil, and form the basis of services including AirbitzDarkWallet (alpha) and OpenBazaar (soon in alpha).

Bitcoin Magazine sat down with Voskuil to learn more about this maverick implementation.

Eric, first of all, what happened to Amir? Do you know what he’s up to these days?

Yes.

…Yes?

I’m in touch with him. He’s doing well. But it’s not really my place to say more.

OK, so Amir seems gone for now. One of the reasons he launched Libbitcoin was to diversify the development ecosystem. Do these ideals live forth?

I don’t speak for other Libbitcoin contributors; each has their own reasons and their own opinions. But Libbitcoin’s core values have always been privacy, scalability and integrity. Indeed, if any individual or group can change consensus rules – consensus means agreement by all – Bitcoin’s integrity has been compromised.

Bitcoin, therefore, needs more than one body of main developers. I don’t have any issues with the Core guys, technically or philosophically. I truly think they are doing great work and for the right reasons. But that is a sword that can cut both ways. Just as there has been cause for concern in the past – think of the Bitcoin Foundation funding development – we can assume there will be in the future.

Why is a homogeneous development ecosystem such a problem? No one is forced to run the software.

True, but Bitcoin requires decentralization for survival. If there is only one team of experts maintaining the only implementation, the whole ecosystem is extremely weak. If that team ends up on one or two payrolls, or is perhaps co-opted by state actors, there are obvious implications. It’s even worse than just having one Web browser, because the lack of diversity in browser choices is not as damaging to people as losing decentralized money.

To be strong, Bitcoin needs expert volunteers working in a global virtual community on various implementations that people actually use. This provides credible balance in the case of real conflict. Libbitcoin is playing the long game, and is making major investments in several important areas. This ultimately complements and improves other implementations, just as it benefits from them.

It’s interesting that similar arguments have recently resurfaced. The Bitcoin Classic team in particular maintains that diversifying the development ecosystem is a key goal.

The important benefit of developer diversification is greater resistance to centralization pressure. Libbitcoin is first and foremost a tool of resistance, though to be effective it must also be great technology. A code fork that simply changes a consensus rule because there is not universal agreement is not resistance, it’s an attack.

Fortunately, Bitcoin has always anticipated this scenario. The uncertainty may not be good for the exchange price in the short term, and people who aren’t paying attention may lose money. But Bitcoin will be stronger for it. Bitcoin has to be able to withstand such attacks.

Increasing the block size limit by one megabyte is an attack?

A dissenter always has the option to start another coin. But an attempt to cause a change in consensus rules without actual consensus is an attempt at theft. Such changes will favor some parties at the expense of others. It’s impossible to predict specifically who will be harmed when a money is altered, since value is subjective. But the question becomes moot in the case of consensus. With consensus the change is an increase in value for all, since all prefer the change.

In Bitcoin, larger hash power currently has an increasing advantage as blocks grow in size. Similarly some businesses may benefit from the possibility of higher transaction volume and minimal fee pressure. Except to the extent that these parties are also coin-holders, the theft is not of their value. At the same time they have a financial interest in changing the rules.

I’m not keen on any block size limit increase presently. I assume we may need to do so at some point, but given the minimal fee pressure we see today, there is absolutely no urgency. And given the lack of consensus it would not be appropriate to try.

Wouldn’t it be better to avoid rising fees for now, to incentivize adoption? Be a bit more pragmatic?

Decentralization is the purpose of Bitcoin and essential to its existence.

Larger blocks create centralization pressure, an observation that does not seem to be in dispute among developers. And given the current state of the ecosystem, with a handful of pools directing most of the hash power and an apparent declining number of validating users, it seems one megabyte is problematic enough.

By analogy, imagine a door lock company advertising that they have the best locks on the market. People need to be able to get through doors, and their lock makes that really easy, so that the most people possible can get through! The company considers security important … but not at the expense of ease-of-use. Can this reasonably be described as ‘pragmatic’?

If Bitcoin centralizes and succumbs to the censors, it will have nothing to offer its users.

Cheap and fast transactions offer a certain value, don’t they?

Sure, but costs are not reduced through the magic of Merkel trees, or some other mundane technology employed by Bitcoin. Costs are reduced by removing the state from the control of money. Censorship resistance is the only way Bitcoin achieves cost benefits over other financial technologies.

PayPal set out to do the same things as Bitcoin, and failed. Upon running afoul of the censors, their business model was forced to change. The cheap, rapid, programmable, international peer-to-peer payments they imagined never materialized.

Similarly, if Bitcoin cannot resist state controls, countless intermediaries, high transaction costs, inflation taxes, bail-ins and state-by-state currency controls will remain the norm, and it won’t be able to achieve lower cost.

Satoshi said Bitcoin should be able to scale on-chain. He thought fees would be cheap, and he said that the block size limit could be lifted when needed.

Look, there is no question whatsoever that the threat Satoshi was working to defeat is the state. And a path to Visa-level transactions on the Bitcoin blockchain is quite clearly a fatal blow to censorship resistance. His explanation of how the block size limit could be raised does not imply any contradiction, it’s just Satoshi saying that when a block size increase makes sense it can be done. The decentralist perspective is not that the block size limit can never change.

Scarcity of block space would probably drive transaction fees up as well, to the point where perhaps only the wealthy can transact on-chain. Surely we must compromise somewhere?

I’m aware of these arguments, but this is a ‘split-the-difference’ negotiating tactic based on a faulty premise. It’s sort of like declaring that only the wealthy can fly because aircraft are expensive. But not everyone needs to own a private jet. The analogy in the legacy financial system would be consumers buying a cup of coffee using the SWIFT network directly.

There will inevitably be layering on Bitcoin, as analogous systems have done for centuries.

What’s interesting about rebuilding the SWIFT network? What happened to the vision of electronic cash?

The “electronic cash” envisioned by Satoshi is cash; it is not notes, scrip or bank credits. We have come to think of bank notes as cash, but they are actually contracts for debt. The note holder is owed something by the issuer. Cash is a commodity with certain properties that make it useful as money. Cash is largely gone from the world, and people cannot return to physical commodity money, as it cannot be moved online. Bitcoin is really our only option to guard against inflation, counterfeit, capital controls and high costs in general.

And given that bitcoin – lowercase b – is cash, and the blockchain is the definitive truth on where the money is, Bitcoin – uppercase B – is a settlement system. If it wasn’t, it must use something else for settlement – and that isn’t the case.

Some might take issue with this vision, but that’s because they imagine existing banks, financial institutions, and – most importantly – censorship. A global censorship-resistant settlement network is not like anything we’ve ever seen before. It is, indeed, the goal many people are working towards.

That system will allow people to buy their coffee with electronic cash, but Bitcoin will never carry every coffee purchase on-chain. Those who make the Visa-analogy either don’t understand how Visa works, or don’t understand how Bitcoin works. And let’s not kid ourselves: Users really don’t care how their transactions are cleared.

Rising fees might hurt Bitcoin startups as well.

Indeed, much of the block size argument is coming from outside of what I consider Bitcoin. Organizations that operate centralized services, like web-wallets and APIs. The more successful they are, the less decentralized Bitcoin becomes.

What people don’t seem to realize is that you can’t make money on Bitcoin in the way they are used to making money. A large part of the Bitcoin industry is fumbling around, burning off capital on stupid stuff. It’s a common pattern in a new industry, I think. It’s an interesting problem, profiting from a system that defies centralization and intermediaries, and that requires free software. … But Bitcoin doesn’t exist to be a profit vehicle for startups.

So how do you suggest Bitcoin move forward?

Fundamentally, the objective is human liberty. The perpetual ubiquity of decentralized money is necessary in advancing this goal. Individual users must validate their own money for Bitcoin to survive.

But this magnificent opportunity is falling away because it’s easier to use centralized services. It’s my desire to see developers contributing to the strength of Bitcoin, not inadvertently contributing to its demise. Libbitcoin is our contribution to helping them succeed.

The post ‘Bitcoin Always Needed More Than One Body of Developers’: An Interview With Libbitcoin’s Eric Voskuil appeared first on Bitcoin Magazine.

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Why Some Changes to Bitcoin Require Consensus: Bitcoin’s 4 Layers

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The long-lasting block size dispute and the recent introduction ofseveral new Bitcoin implementations highlighted that not all Bitcoin nodes apply the exact same rule –  and, perhaps more important, that not all development teams apply similar policies when it comes to implementing these rules.

The development team behindBitcoin Core, Bitcoin’s historic “reference client,” requires widespread community consensus before it implements rule changes such as raising the block size limit, while other changes are not held to the same standards. 

Meanwhile, some Bitcoin forks, such as Bitcoin LJR, are generally accepted by the development community, while others, such as Bitcoin Classic, attract a lot of controversy. This is considered inconsistent by some.

But this difference can be explained. Certain rule changes, implemented in certain forks, impact the Bitcoin network very differently than others. Or more specifically: Certain rule changes impact very different layers of the Bitcoin network. And some of these rules changes can split the Bitcoin network while others cannot.

To clarify these differences, Bitcoin Core developer andCiphrex CEO Eric Lombrozo recently proposed to tag the relevant layers in all Bitcoin Improvement Proposals. These are the four main layers on the Bitcoin network as specified in hisBIP 123, and the respective importance of consensus on each.

The Consensus Rules

The consensus rules are Bitcoin’s most important rules. They establish – among many other things – the amount of bitcoins included in the block reward, the mining difficulty, the type of proof-of-work required, and, indeed, the block size limit. 

These rules are so important because they determine which blocks are deemed valid by full nodes. And if all full nodes apply the same consensus rules, it ensures they all maintain an identical copy of the blockchain. 

If different nodes apply different consensus rules, however, they risk accepting blocks that other nodes reject. Such discrepancy could lead to different nodes maintaining completely incompatible versions of the blockchain, effectively splitting the Bitcoin network.

Bitcoin’s consensus rules can be changed in two ways. A change thatadds extra rules to the protocol (making previously valid blocks invalid) is called a soft fork. Soft forks require a majority of hash power to support the change. The blocks that are produced under the new rules would be valid under the old rules as well, so nodes that didn’t upgrade would still follow the longest chain.

However, non-upgraded miners might produce blocks that are invalid under the new rules, wasting hash power. And non-upgraded full nodes would no longer be able to verify whether blocks adhere to the new rules, requiring them to wait additional confirmations to achieve the same level of security. 

For these and other reasons, the Bitcoin Core development team has said that it will typically require a super-majority of 95 percent of hash power to agree on soft forks.

A consensus rule change that removes rules from the protocol (making previously invalid blocks valid) is called a hard fork. A hard fork requires all full nodes on the network to adopt. Any node that doesn’t implement the change might not follow the longest chain at all, as it could consider that chain invalid and stay on the “old” chain instead. This could split the Bitcoin network as described above. How long such a split would persevere is not really a technical question, but rather a debate on politics, sociology, economics, game theory and more.

Soft fork changes to the consensus rules without consensus couldin a worst-case scenariocause a minority of miners to waste hash power, and (slightly) degrade the security of full nodes.

Hard fork changes to the consensus rules without consensus couldin a worst-case scenariosplit the Bitcoin network.

Peer-to-Peer Layer

The peer-to-peer layer of the Bitcoin network covers how full nodes share data and what data they share. This includes protocol rules to send and receive transactions and blocks, as well as special data packages such as Segregated Witnesses or Invertible Bloom Lookup Tables.

Most importantly, the peer-to-peer layer must ensure that new blocks find their way through the entire network, as well as data packages required to verify blocks. If this relay policy fails, it could result in a network split where different nodes hold different versions of the blockchain – at least until blocks find their way through the entire network again.

But as opposed to the consensus rules, it’s not necessarily a huge problem if not every single node applies the exact same relay policy. Since most nodes forward blocks to at least eight peers, this amplifier should ensure that all nodes receive all blocks even if some of them don’t forward properly.

Nodes have even more leeway when it comes to relaying transactions. Most nodes on the Bitcoin network today use a “first seen” policy: If they receive two or more conflicting transactions, they reject the latter. But a growing number of nodes apply variations of “replace-by-fee” policies, meaning they pick the transactions which include the highest fees – regardless of which came first. Additionally, some nodes reject certain types of transactions altogether, or don’t relay any transactions at all.

That said, miners ultimately decide which transactions they include in blocks, and why. It’s only when transaction relay policies vary wildly, or are sufficiently restrictive, that it might become unpredictable which transactions are confirmed for these reasons alone.

Changes to the peer-to-peer layer without consensus couldin a worst-case scenariosplit the network. This risk exists if blocks can’t find their way throughout the whole network. The split will, however, automatically resolve once the network is reconnected.

If the changes concern transactions only, they couldin a worst case scenarioprevent certain transactions from confirming. It could also decrease the reliability of unconfirmed transactions. But it cannot split the network.

Application Programming Interfaces and Remote Procedure Calls

The Application Programming Interface (API) and Remote Procedure Call (RPC) layers are communications layers on top of the peer-to-peer protocol. Many Bitcoin software applications – such as mobile wallets and block explorers – communicate with the blockchain through these layers by connecting to an API or software library.

If one of these layers fails, all connected software applications will be unable to reliably communicate with the Bitcoin network. Mobile wallets won’t know if they received Bitcoin, and blockchain explorers can’t tell whether a new block was found. However, all other Bitcoin users won’t notice a thing; the network itself is still running fine.

Changes to the API and RPC layers without consensus couldin a worst-case scenariocompletely disconnect users of these layers from the Bitcoin network. But such changes cannot split the network itself.

Applications

Last, the application layer refers to how Bitcoin software applications create and use certain types of data that doesn’t really touch the network directly, but that is useful to synchronize across applications.

This includes, for example, address formats, private keys generation or wallet back-ups. If one wallet generates an address that another wallet doesn’t consider valid, transacting between them will be impossible. Or if one wallet uses one method to create a backup address seed, and another wallet uses another, users can’t recover their private keys with each wallet. The same goes for wallet backups.

Changes to the application layers without consensus couldin a worst case scenarioprevent some users from mutually transacting, and cause other inconveniences. Such changes cannot split the network. Thanks go out to Lombrozo for technical guidance.

The post Why Some Changes to Bitcoin Require Consensus: Bitcoin’s 4 Layers appeared first on Bitcoin Magazine.

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