
Nasdaq experiments with Bitcoin's blockchain - edward
http://www.theguardian.com/technology/2015/may/13/nasdaq-bitcoin-blockchain
======
vectorpush
I'm going for a "wait and see" attitude on this one because I suspect there
must be some hidden opportunity to extract wealth from the blockchain that I'm
just not smart enough to see, but just by reading the article, it seems like
this is another case of "groundbreaking because... blockchain."

FTA: _The company will be creating “coloured coins”, appending special
information to the blockchain indicating that a particular fraction of a
particular bitcoin can be redeemed according to the terms written into it.
That coloured coin can then be passed around just like a normal bitcoin, while
preserving a record of who owns the asset it is linked to._

Ok. I don't have an inherent dislike for bitcoin. I understand how bitcoin
works. I understand the incentives. I've read the whitepaper. I don't see how
decentralization is useful for this task. Why would I want to store asset
records on the blockchain? What does this make possible that isn't already
possible without the massive computational overhead of a global decentralized
ledger? I understand the implications that financial assets can be tagged to
colored coins and that those coins can be traded without the need for a third
party. I understand that it's all public and that the blockchain's data
integrity is fortified through global consensus. Why does this matter? What
does this make possible?

I also wonder how the institutions will react when rich investors start
getting their colored coins stolen by hackers. Will the NASDAQ honor the value
of APPL colored coins that were pilfered from someone's laptop? What about in
situations where coins are lost or accidentally sent to the wrong address?
Will some random bitcoiner wake up one day to discover that they're a majority
shareholder of Microsoft?

As I said, I'll wait and see, because if I was as smart as these finance
people then I'd probably have an apartment in the heart of Manhattan to prove
it.

~~~
sktrdie
It allows one to put a piece of information on the internet, and as long as
the network lives, nobody can possibly remove that piece of information. It's
stuck there forever. Not sure if that will be useful or not in the future, but
that sort of thing was not possible before bitcoin came along.

I look at bitcoin more as a breakthrough computer science theoretical finding.
It's not just an idea that needs to "make something possible". It exists in
nature whether we find a use case for it or not.

------
VikingCoder
I hate "proof-of-work."

Sure, it's possible it's the only way to get all of the benefits that we all
love. But I really wish there was a better way.

~~~
oleganza
Imagine you are sitting in the bunker and only get some bits of data from
outside world. You cannot have any other trusted source of information about
these bits except from the bits themselves. And there's a plenty of reasons
for someone to actively try to deceive you ("active attackers" as in "hostile
environment"). You have no idea how many people are out there and how much
they are connected and who is connected to you. You are just sitting in this
blinded box with a radio station.

Your goal is to make sure that whatever bits you receive are exactly the same
as everyone else is seeing. In other words, that it is practically impossible
for an attacker to produce alternative bits satisfying your requirements and
show them to someone else (and not showing to you). One way to make it is to
make these bits fully predictable (like digits of Pi), but that's not useful.
Another way is to implement a gigantic ever-growing proof-of-work that
implements the condition of "practical impossibility". You receive some bits
with such a big pile of PoW that you can be sure it's not possible for someone
to quietly build an alternative bunch of bits with the same PoW and unleash it
on you or anyone else.

Protein folding and proof of stake do not help with this problem. You need
abstract ever-growing scarcity implemented by converting energy into a short
number.

You might ask: why should we be so strict with the security requirement? Well,
because history of civilization shows that people always try really hard to
build hierarchies of power to manipulate property and human beings. Any system
of global consensus outside of existing power structures will face huge amount
of resistance and therefore must be designed from ground up to withstand it.

~~~
VikingCoder
If you have no idea how many people are out there, then you don't have any
idea how expensive it would be to produce a false "big" pile of PoW.

------
k2enemy

        Bob Greifeld, Nasdaq’s chief executive, said: “Utilising the 
        blockchain is a natural digital evolution for managing 
        physical securities. Once you cut the apron strings of need 
        for the physical, the opportunities we can envision 
        blockchain providing stand to benefit not only our clients, 
        but the broader global capital markets.”
    

What?

~~~
this_user
"144 MB per day ought to be enough for anybody." \-- NASDAQ

The problem with trying to store data that does not represent actual BTC
transactions in the Blockchain is that it simply does not offer a lot of
storage space. Currently one 1 MB block is added on average every 10 minutes.
That's 144 MB a day that the chain can store. The miners operating the network
receive a reward of 25 BTC per block plus transaction fees. At a price of 235
USD/BTC that is at least ~5900 USD per MB stored which makes storing anything
in the BC extremely expensive.

Unless the BTC developers make a decision to implement changes in order to
improve the scalability of the network, I really don't see why you would even
try to use the BC for something like this. When you start to actually store
meaningful amounts data in the BC, you are going to jam the network since
there is no elastic supply of storage space. Secondly, the increased demand
for inclusion of transactions is going to drive the transaction fees higher.
In the end, you will have a high costs for a solution that does not even
remotely offer the kind of performance you need.

------
Angostura
One question from someone who isn't very well versed in Blockchain technology.

As I understand it, it is potentially possible to attack Blockchain integrity
by amassing the majority of computational capacity among the people computing
the blockchain.

Who would be computing blockchain changes in the NASDAQ case and what are the
implications of this kind of attack for NASDAQ?

Apologies if this is a silly question.

~~~
jackgavigan
Nasdaq is (apparently) using the Bitcoin Blockchain, so the same people who
mine bitcoins will be adding Nasdaq's transactions to the Blockchain.

Anyone with a large amount of Bitcoin mining capacity is implicitly
incentivised to _not_ mount an attack on the integrity of the Blockchain
because doing so would probably dent confidence in Bitcoin, causing the price
to drop. That would reduce the "net present value" that the miner can expect
to receive going forward, likely by more than the short-term "win" they could
achieve through a successful attack.

However, if the Blockchain is being used for _other_ purposes (e.g. recording
ownership of high-value assets) and the potential gain to someone with a large
amount of mining power of attacking/rewriting the Blockchain is large enough
that it significantly outweighs the "net present value" that can be realised
from normal mining operations, then the incentive to _not_ attack the
Blockchain is somewhat diminished.

~~~
this_user
> Anyone with a large amount of Bitcoin mining capacity is implicitly
> incentivised to not mount an attack on the integrity of the Blockchain
> because doing so would probably dent confidence in Bitcoin, causing the
> price to drop. That would reduce the "net present value" that the miner can
> expect to receive going forward, likely by more than the short-term "win"
> they could achieve through a successful attack.

That's the argument Bitcoin advocates always use, but it oversimplifies the
problem. The assumption is that no one would do this, because it is not in
their _long-term_ best interest. What it leaves out that mounting one attack
of a series of attacks in quick succession may actually make it worth the
costs in the short-term. This is especially true when we talk about large
amounts of real assets. Furthermore, there may be malicious entities that are
prepared to pay the costs just for the sake of wreaking havoc. The argument
that 51% attacks cannot happen has, in fact, already been disproven since
there is evidence that the GHash mining pool did perform such an attack [1].
All it takes for something like this to happen is one rogue employee in an
organisation that controls enough hashing power.

[1]
[https://bitcointalk.org/index.php?topic=327767.0](https://bitcointalk.org/index.php?topic=327767.0)

------
wardb
Nasdaq is doing an _experiment_. Not going all-in with Bitcoin as the title
suggests.

~~~
sanswork
Overselling non-news into massive victories is basically what the bitcoin
community does. I could list 25 things that were going to bring Bitcoin
mainstream over the past 2-3 years without even trying that have all failed to
pan out.

Since failures fade away silently most of the time they are left wondering why
these 'victories' aren't leading to increased prices and repeating the phrase
"how can we have all this good news and no increase in price?".

~~~
drcross
Bitcoin has also died over 70 times-
[http://bitcoinobituaries.com](http://bitcoinobituaries.com) so maybe it's not
a bitcoin community problem but just journalists creating linkbait.

~~~
sanswork
Have you ever read through that list? Most of them don't say it has died they
say it is dying. Given the amount of investment, the number of new services,
and the publicity it has received over the past 2 years the complete lack of
interest from the general public says it probably is.

Will it disappear anytime soon? Not a chance.

Is it past its peak? Did it miss its chance at mainstream success? Quite
possibly.

~~~
IkmoIkmo
> Is it past its peak? Did it miss its chance at mainstream success? Quite
> possibly.

Quite possibly but it's too soon to tell. The fact is that price isn't always
the best proxy for success. More people using it, more companies getting
involved etc, can be more important.

When we look at price historically we can find strange things like the price
being a fraction of a dollar (some 70 cents or so) in April in 2011. Only a
few months later, in June 2011, the price was $30. And then it collapsed that
very same year and the price dropped to $2, a few times more than it was
earlier, but far from the peak.

It'd have been pretty myopic to then conclude that bitcoin was past its peak,
even though in the short term it was, having lost more than 90% of its value
at peak. It'd also have been wrong to say it missed its chance at mainstream
success.

Today the price is an order of magnitude larger, and users, usage and
involvement with mainstream (large) companies has grown even more.

So again, it's quite possible, but I think too soon to tell.

As for the lack of interest from the general public... I think bitcoin at its
core is a utility, like you could say the internet is. The internet is
extremely uninteresting to people, very few get it, nobody is excited about
it. But the web is huge, as is emailing and skype and netflix. That's
completely different from the Internet though, the boring
platform/utility/infrastructure that supports it. I can't blame someone not
being interested in bitcoin. But internet of things having digital wallets and
doing payments, contracts, deeds etc on the bitcoin ledger, where all the
consumer sees is that it 'just works', that's interesting. It's up to
companies then to build ontop of bitcoin, and there is tons of interest from
companies, both startups and traditional (tech) companies. Which means it's
not very surprising to see companies and VCs get excited, but the general
public not, in the same way that few got excited about the Internet, but
Internet entrepreneurs did, who built companies like Amazon or Skype that
people did get excited about. The fact that bitcoin couldn't start out like
that and had to grow based on a small amount of fanatics looking to avoid the
dollar/euro/etc and live on a new currency is probably a great source of
distraction from the larger point of bitcoin as a platform, as it reduces
bitcoin to being a currency used to shop online and not many feel like doing
that, making it look as there is no interest from the general public and
nobody will ever use it etc.

~~~
sanswork
What I see in the bitcoin space is the participants constantly trying to find
a reason for its use.

Payments - It isn't actually a better experience for customers so it is
failing against the incumbents. The only play it is better is DNMs.

Store of Value - It is extremely risky so the only people pushing this are
ones that are already bought in and figure hoarding is the only thing that
will drive the prices back up

Sharing money between friends - Venmo and friends far and away destroy bitcoin
in this use case.

Remittance - Has potential but all the companies so far are basically saving
money by skirting money transfer laws and using other peoples services. That
isn't sustainable. The expensive part of remittances has never been the
movement of value. They are also all extremely secretive about their numbers
which makes me suspicious since their reasons given are extremely week.

Micropayments - Bitcoin sucks for micropayments so every solution for this is
basically an off chain system. Soon enough they will discover that all the
other micropayments services shut down because the demand for micropayments is
non-existent

Data Storage - We're seeing this one more and more. The problem is all the
things people are trying to do still require third party validation and
registration(shareholders and landholders need to be identifiable and someone
needs to verify that information). I don't see this panning out in any big
way.

Communications protocols - This is another big one. With the 21 announcement
everyone and their dog is talking about how the blockchain will allow devices
to communicate without needing to agree on a protocol. But they are ignoring
the fact that in that use case the blockchain is a medium not a protocol so
there would still need to be an agreed protocol on top and if you're going to
do that might as well just centralize it or use private APIs.

Did I miss any?

Bitcoin people also love to compare it to the early internet but the existence
of the internet itself makes that comparison weak since the internet has
massively sped up the distribution of information and technologies. They then
say that its different because it involves money but look at the early Paypal
growth. It wasn't like getting people to use their credit cards online was
easy in 2000.

~~~
ikeboy
You missed anti-censorship. Many controversial entities have been banned from
traditional funding sources (see wikileaks, mega, etc.)

~~~
sanswork
Yes, I guess the first one should be DNMs and controversial entities.

