After months of small-scale testing in the Philippines, blockchain payments app Abra launched in the US today.
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On Wednesday, the Bitcoin community went into a tizzy over BIP 75 (BIP stands for Bitcoin Improvement Proposal), which is, in short, a layer-2 protocol for improving the user friendliness of Bitcoin payments.
The community, especially on Reddit, is concerned that the option to identify oneself to the sender or receiver of a payment may lead down the road toward know your customer (KYC) and anti-money laundering (AML) restrictions on the Bitcoin protocol. The hysteria around this proposal appears to have emerged from a post made by Bitcoin Core contributor Peter Todd to the Bitcoin development mailing list.
What is BIP 75?
Before getting into the controversy, it’s important to understand the details of BIP 75. Bitcoin Magazine reported on the proposal’s ability to simplify wallets for the average Joe earlier this year, but here are the key points:
What Are the Concerns with BIP 75?
There are currently two separate concerns with BIP 75 being discussed in the Bitcoin community. For one, some people believe that this BIP could make it easier to trace Bitcoin payments to real-world identities or simply streamline KYC and AML compliance for Bitcoin. The other issue is whether this BIP should be included in the main BIPs section of the Bitcoin Core GitHub repository.
“I’d strongly argue that we remove BIP 75 from the BIPs repository, and boycott wallets that implement it,” Peter Todd recently stated on the Bitcoin development mailing list. “It’s bad strategy for Bitcoin developers to willingly participate in AML [and] KYC [compliance], just the same way as it’s bad for Tor to add wiretapping functionality, and W3C to support DRM tech. The minor tactical wins you’ll get [out] of this aren’t worth it.”
A Reddit thread linking to that post on the Bitcoin development mailing list was quickly filled with calls for a boycott on Breadwallet.
Bitcoin Magazine reached out to Todd to gain a clearer picture of his thoughts on the matter. In terms of whether the BIP should be removed from the Bitcoin Core GitHub repository, Todd said, “I think we should remove it because like it or not, we are putting a stamp of approval on it, to a degree.”
Some others, such as Bitcoin Core contributor Pieter Wuille, believe a removal would amount to censorship; however, Todd also pointed out that, in the past, a proper BIP for a colored coins standard has also been denied access to the GitHub repo.
When it comes to the issues he sees with BIP 75 more generally, Todd said, “BIP 75 institutionalizes [regulatory compliance] in a convenient way that everyone can easily use and expect. We should comply with AML [and] KYC [regulations] only grudgingly.”
“In much the same way that we have the threat of Tor nodes keeping logs; we don’t help that process by creating a standard for those logs,” Todd added.
To Todd’s point, BIP 75 does make it easier for companies (financial in nature or not) to collect data on their customers. While the threat of a government forcing normal retailers to collect identifying information about customers who use Bitcoin always existed, BIP 75 has the potential to streamline this process.
During his conversation with Bitcoin Magazine, Todd made it clear that he’s more concerned with senders of bitcoins identifying themselves than the recipients of those funds. “The part of BIP 75 that’s about determining who you’re sending money to isn’t objectionable, just the idea of trying to figure out who is actually sending the funds,” he stated.
Those who disagree with Todd would point out that BIP 75 is a completely opt-in protocol. To this point, Todd responded, “Blacklists can also be implemented in an ‘opt-in’ way; that doesn’t mean we should support the concept.”
BIP 75 Author Responds
Bitcoin Magazine also reached out to one of the authors of BIP 75, Netki CEO Justin Newton. One of the first things Newton was able to clarify was that the personally-identifying information sent in the payment protocol can be seen only by the sender and receiver involved in a particular transaction.
“We actually added another layer of encryption (at the application layer) as a way to protect against the data being man-in-the-middled,” said Newton.
According to Newton, a BIP 75 user does not even have to trust his or her own phone or laptop to keep payment info private when a hardware wallet is used.
Newton also shares similar concerns to Todd and others in terms of a potential slippery slope toward AML and KYC compliance on the vast majority (if not all) of Bitcoin transactions.
“I actually share their concern, but it led me to a different conclusion,” said Newton. “My view was that AML and KYC compliance is going to be required if we want to get to the mass market, and we need to ensure it is done in a way that fundamentally protects fungibility, privacy and the open, permissionless nature of Bitcoin. In the absence of a standard that encourages those values, we will end up with hidden systems that do exactly the same thing, but without taking the concerns of the community into account.”
Judging from a Reddit comment by Breadwallet CEO, the wallet maker is not interested in BIP 75 for regulatory compliance reasons. Instead, Breadwallet is mostly interested in the proposal for reasons related to the user-friendliness (or lack thereof) of Bitcoin wallets. BIP 75 enables useful features that are found in more mainstream payment applications (think Venmo) such as human-readable transaction logs and address books. It’s also possible for users to manually track their transaction history on their own, but BIP 75 greatly simplifies the process.
So, Is BIP 75 a Worrisome Proposal?
The BIP 75 debate ties in with many of the other Bitcoin debates that have taken place over the years. Does the community want privacy and security or easy-to-use wallets? Is it worth abandoning some of the early principles of the network in order to seek mass adoption?
In this case, it appears that not much of a trade-off is being made by individuals who wish to use BIP 75-enabled wallets. All of their personal information is end-to-end encrypted, and they aren’t likely giving up much (if any) information that wouldn’t already be known by the recipient of a transaction. Also, it’s important to remember that this is a layer-2, opt-in protocol.
Having said that, it’s always important for the Bitcoin community to remain vigilant against attempts to apply traditional financial regulations to the Bitcoin blockchain. After all, Bitcoin’s core value proposition is the ability to transfer value across the internet in a censorship-resistant manner. The people who need Bitcoin as a payment system are those who would normally be blocked from other, traditional systems such as PayPal or credit cards.
It appears that BIP 75 is not a huge move in the wrong direction, but all Bitcoin users should refrain from attaching identifying information to their transactions as often as possible. In addition to that, it wouldn’t hurt to focus on the real problem, which is the need for enhanced privacy features.
The post Does BIP 75 Really Threaten Bitcoin’s Fungibility? appeared first on Bitcoin Magazine.
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The Hyperledger Project, led by the Linux Foundation and aimed at the development of an enterprise-grade, open source distributed ledger framework and codebase, recently announced that seven new members have joined the project.
New members are INVeSHARE, MonetaGo, Swedish developer Norbloc, the Moscow Exchange, and three Chinese firms: BitSE, Belink Technologies and Onchain.
“The enterprise application of blockchain technology is set to change the way we conduct business and will have a profound impact across all sectors of business,” said Brian Behlendorf, executive director of the Hyperledger Project. “To be able to welcome this many new members each month is not only a testament to what we are doing but is paramount to our success in developing distributed ledger technology for the world.”
The growing global dimension of the Hyperledger Project, with its new Russian and Chinese members, seems especially interesting. In fact, while payment and financial applications of distributed ledger technology are relatively well established in Europe and the English speaking world, new applications beyond finance, such as smart contracts, e-voting and the Internet-of-Things (IoT) as well as new markets such as (the potentially huge) Chinese market, are likely to attract more interest and investments in the coming year.
The Moscow Exchange, formed in December 2011 by merging the Moscow Interbank Currency Exchange (MICEX) and the Russian Trading System, is the largest exchange group in Russia; operating trading markets in equities, bonds, derivatives, the foreign exchange market, money markets and precious metals. The Moscow Exchange Group also operates the National Settlement Depository (NSD), Russia’s central securities depository, and the country’s largest clearing service provider (National Clearing Center).
In May, Bitcoin Magazine reported that the NSD developed and successfully tested an e-proxy voting system running on a distributed ledger built with the NXT distributed cryptographic platform.
“Moscow Exchange is excited to join the Hyperledger Project,” said Sergei Poliakoff, CIO of Moscow Exchange. “We believe in the future impact of distributed ledger technologies for the whole financial industry. Our team has been exploring possible applications of blockchain in trading, clearing and settlement. We’re looking forward to working with this robust community to further Hyperledger’s vision and shared ledger technology.”
Shanghai-based BitSE, established in 2013 by founders from IBM, Alibaba and Louis Vuitton, developed Blockchain-as-a-Service (BaaS) applications. The company operates a research lab focused on distributed consensus, distributed applications and smart contracts. The company’s products include VeChain, an anti-counterfeiting solution. BitSE is also developing blockchain development and running environment Quantum, smart contract applications and private blockchains. Earlier in June, BitSE established a partnership with PwC China to create a team of 50 specialists and bring one-stop blockchain technology solutions to the China market.
“Blockchain technology is likely to take human beings to a new big era of an economy republic; Hyperledger is the foundation writing the constitution,” said D.J. Qian, co-founder and CEO of BitSE. “With an R&D team of blockchain, coming from nine different countries, BitSE is more than happy to be part of it as one of the pioneers and willing to contribute thoughts, codes and anything that matters to accelerate this evolution and reformation.”
Belink Technologies is a financial information service provider operating a distributed ledger technology for enterprise registration and the distribution of non-cash digital assets. “Using an open source framework for distributed ledgers could reduce the technical threshold of application innovation and promote the establishment of uniform standards,” said Chen Hua, CEO of Belink. “Belink is especially pleased to become an active participant in the Hyperledger Project, as the need to adopt distributed ledger technology to help institutions carry out financial service innovation in China grows.”
Onchain, a blockchain technology startup in China, developed the AntShares project for registration of digital assets. The project is described in a white paper (Chinese only) and its open source code, distributed under the MIT license, is available online on Github. “As a leading open-source contributor in China’s blockchain community, Onchain shares the same values as the Linux Foundation and the Hyperledger project intrinsically,” said Da Hongfei, founder and CEO of Onchain. “We believe international collaboration plus local experience are key to the adoption of distributed ledger technology in China. We are also very excited to see other Chinese blockchain startups join Hyperledger and look forward to adding our combined expertise to the project.”
See the Hyperledger announcement for quotes from other new members.
The post Hyperledger Global Expansion Adds Seven New Members to Blockchain Initiative appeared first on Bitcoin Magazine.
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Bitcoin Core contributor, Peter Todd, was recently interviewed on Bitcoin Uncensored by co-hosts Chris DeRose and Joshua Unseth. Ethereum, The DAO, private blockchains and many other topics were discussed but DeRose turned the conversation toward an often-discussed concept (at least on Bitcoin Uncensored) near the end of the show: The idea that governments essentially subsidize the usefulness of Bitcoin and the bitcoin price through their various regulations.
Bitcoin Fulfills a Need in the Market
There are many types of applications that people want to build with blockchain technology but only a minor fraction of these projects have found any use in the real world. While there are plenty of techno-geeks who think it’s cool to play around with various cryptocurrencies and blockchain-related projects, Bitcoin seems to be the only blockchain system that has seen use outside of those who are tech-savvy.
“We see that a lot of the people that are using Bitcoin (locally and looking at the exchanges) are using Bitcoin because they need to use it,” DeRose said. “They have to use it because they can’t use fiat.
“This is what has differentiated Bitcoin from other blockchain projects, in that Bitcoin fulfills a need,” DeRose added.
Fungibility a Huge Part of This Need
When it comes to the situations where Bitcoin is needed, fungibility plays a huge role. DeRose referred to this use case as “the ability to convert value into anonymous value.”
When asked about the importance of fungibility in Bitcoin, Todd said, “Yeah, I think that’s Bitcoin’s main use case there. If you didn’t have that as a need, you could just go use PayPal.
“The most clever thing governments could do to kill Bitcoin is make anonymous, electronic cash,” Todd added.
Of course, it’s also true that there’s plenty of room for improvement in terms of Bitcoin’s fungibility. New privacy improvements, such as Confidential Transactions, may eventually offer assistance here. JoinMarket, a market for CoinJoin transactions, is another project that is already helping users gain more effective privacy on the blockchain right now.
Governments Subsidize Bitcoin with Their Regulations
Since Bitcoin is mostly needed in situations where fungibility is a must, it isn’t much of a stretch to say that governments essentially subsidize the usefulness of Bitcoin because government-backed restrictions and censorship on financial transactions are a major factor in the need for a fungible bearer ecash.
When asked if he thinks governments are issuing regulatory subsidies for the existence of the Bitcoin blockchain, Todd responded, “I think that’s pretty much exactly what’s happened.”
Todd then went on to talk about the abandoned MintChip project in Canada, which was essentially an attempt to create an anonymous, electronic cash system. “It appears they axed [the project] because nobody wanted to go and create anonymous, electronic cash. They just didn’t have the willpower to do it,” explained Todd.
Does Bitcoin Have Government to Thank for Its Existence?
This gets to the question of when it makes sense to use a blockchain. Are they still useful in a world where governments allow anonymous ecash to exist at a large scale? “It may only make sense when the regulatory environment allows it to make sense,” DeRose noted.
Todd put this thought experiment another way: Would Tor be interesting or useful if governments didn’t wiretap their citizens? The answer here is obviously yes because governments are not the only “adversaries” in the world. The Tor Project has a list of the types of people who use the anonymizing network on their website.
While there may be some use cases of bitcoin that don’t involve getting around government regulations, it’s clear that these government-avoiding use cases are what propelled Bitcoin to what it is today. Bitcoin first rose in popularity due to Silk Road and the financial blockade on Wikileaks. Silk Road allowed Bitcoin users to buy and sell goods and services that had been criminalized by various governments around the world, while Wikileaks is a journalistic organization that runs on donations ‒ strictly via bitcoin during the financial blockade.
It’s unclear whether Bitcoin would have taken the digital world by storm if these sorts of use cases didn’t exist early on in the technology’s development. The level of distrust in the world’s financial system at the time (and to this day) also couldn’t have hurt.
The post How Governments Subsidize Bitcoin’s Usefulness and the Bitcoin Price appeared first on Bitcoin Magazine.
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