Blockstream Is Using Satellites to Beam Bitcoin Down to Earth

Today, the bitcoin infrastructure company is launching Blockstream Satellite, an ambitious attempt to use leased satellites to beam bitcoin nearly anywhere in the world. Now in beta, bitcoin users in Africa, Europe, South America and North America can already use the satellites to download a working bitcoin node capable of storing the network's entire transaction history.

But while complex conceptually, the company believes its end result can solve a real issue facing the $66 billion network – without internet, you can't access bitcoin.

And this poses a problem for bitcoin proponents who believe the cryptocurrency could be especially beneficial to people without internet, who also generally live in areas with economic instability.

So, Blockstream decided to set its sights on a solution, and found it in space.

According to Blockstream CEO Adam Back, the project is all about putting bitcoin into the hands of those who "desperately need" it.

He told CoinDesk:

"There is some coincidence between countries with poor internet infrastructure and unstable currencies. The people who are in direct need of bitcoin are those who currently have unstable access to bitcoin. This project will address that problem, and, we hope, will allow many more people to use bitcoin."

The vision

While running a full node is a cumbersome process, it's nonetheless the most secure and trustless way of using the digital currency, and for individuals dealing with political and economic instability, this process could prove crucial.

But because full nodes require an Internet connection and 160 GB of free space, they are a rarity in some regions of the world. There's allegedly only one man running a full node in all of West Africa, for example.

While Blockstream is now taking care of a way to download a full node, there are a few other choice technologies those that want to take advantage of the satellite will need.

Users will need a small satellite dish – if they already have a TV satellite, they could use that – and a USB to connect the satellite to a personal computer or a piece of dedicated computer hardware such as a Raspberry Pi. The rest can be accessed through free, open-source software, such as GNU Radio for establishing a radio connection.

"The cost to entry is extremely low," said Blockstream's head of satellite, Chris Cook. According to him, the package of equipment costs "a little under $100."

Then, once users have those tools, they can pull bitcoin blocks from the satellite, building a bitcoin full node.

Cheaper technology

But while they'll now be running a full node, it still takes some sort of Internet connection to make transactions over the network.

While many users in the areas Blockstream is targeting won't be able to afford mobile data connection plans to initiate transactions, Back argued cheaper communications technologies, such as SMS or bi-directional satellite, could be used instead.

Transactions, he said, take up about 250 bytes, which wouldn't cost more than one penny to transfer using such technologies.

In this way, Back's vision of the satellite as bringing bitcoin even to people completely off-the-grid is theoretically possible. He offered the example of a small hut on the side of the road in the Sahara Desert in Africa, adding:

"With a perpetual generator out back with a satellite dish, a Raspberry Pi by the generator, a local wi-fi hot spot, and the necessary software set up, you could be transacting globally with bitcoin."

Sounds like a lot, but Back argued that it would be pretty cheap, especially if costs are pooled between multiple people, like if an entire village shared the costs of setting up the infrastructure that they could then all use.

Monetizing space bitcoin

While it's ambitious as is, Blockstream is taking that mission even further, adding more satellites as the year goes on, with the hope the most people on earth will be able to access a bitcoin satellite by the end of the year.

"The only people that won't be covered are those in Antarctica," Back said.

While the project is technically feasible, though, is it financially so?

Bitcoin is admittedly a different beast, but other Internet space projects don't have a great track record so far. Although, Blockstream does have plans to monetize the satellite.

According to Back, Blockstream will eventually release an API for developers and companies to send data over the satellite connection for a small bitcoin fee.

He concluded:

"That might allow a smartphone wallet that sends messages to send it via satellite or some application to send messages via satellite. That's a way to monetize the infrastructure and to expand to more services on it."

Solving the Liquidity Challenge of Decentralized Exchanges

Loi Luu is the co-founder and CEO of KyberNetwork, a decentralized, trustless, cryptocurrency exchange. 

In this opinion piece, Luu discusses the challenges facing technologists seeking to popularize decentralized exchanges for cryptocurrency trading, framing liquidity as one of the key obstacles to production.

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The total market capitalization of cryptocurrencies is now above $137 billion, up from $16 billion at the beginning of the year.

But before the world can conduct a significant amount of its transactions via cryptocurrency markets, the problem of liquidity must be addressed.

Liquidity refers to the extent to which a market allows assets to be bought and sold at stable prices. Lower liquidity tends to result in a more volatile market (especially when large orders are placed), and it causes prices to change more drastically; whereas higher liquidity creates a less volatile market, and prices do not fluctuate as significantly.

Today, cash is the most liquid asset. If a transaction of $1 million takes place, the market is able to absorb that transaction easily without the value of the dollar drastically changing. Costs associated with the transaction, and the value of the currency at the time of the transaction, are also known beforehand.

However, the same transaction in bitcoin, or any other cryptocurrency, has a much greater effect on the cryptocurrency's value.

This is because of the market's lack of liquidity. The amount of cryptocurrency available on a specific trading platform can run out, requiring the buyer to complete the transaction at 1–10 percent more than expected.

To complete the same transaction of $1 million, it could end up costing between $10,000 and $100,000 more than the original price to make the trade.

Decentralized trading platforms

Until now, the cryptocurrency space has been dominated by centralized exchanges that help facilitate transaction from government currencies to cryptocurrencies.

Centralized exchanges, like Coinbase, are easy to access and easy to use. However, as many have failed to adequately secure their customers' funds, decentralized exchanges are becoming a popular concept.

Centralized exchanges have been simply unprepared for the recent influx of users, causing major system failures and attracting the attention of hackers. While some centralized exchanges are more secure than others, there's still been a number of security failures, like last year's Bitfinex hack, which resulted in thousands of users losing their savings (until it was later repaid).

Decentralized trading platforms offer an alternative, and perhaps even more valuable service, by promising greater security and transparency. They do not rely on third-party services to hold customer funds. Instead, peer-to-peer transactions are possible through an automated process.

The benefit of using a decentralized exchange is that there is no need to put any trust in the exchange platform itself, as the funds are held by the user in a personal wallet, rather than with a third party. Decentralized exchanges can also provide more privacy, while reducing the risk of server downtime, if only for those who are more tech-savvy.

Unfortunately, decentralized trading platforms still lack the commodity, easy of use, and overall "user support" to attract a mainstream user base. Therefore, the liquidity and market depth of these exchanges is still quite low.

Addressing the liquidity challenge 

Improving the liquidity in decentralizing trading platforms is one way to help encourage mainstream adoption. Of course, many factors contribute to the liquidity of an asset. But, if the ways in which consumers make monetary transactions using cryptocurrencies could be simplified, then it's not difficult to imagine that the demand for such assets would increase.

There's little doubt that trading cryptocurrencies will continue to take place on different kinds of exchanges for the foreseeable future without a single, more stable asset emerging to keep their value in check. This means that overcoming market fragmentation and liquidity problems will require a unique solution.

One approach to solving the challenges that exist in decentralized exchanges is to reduce the cost of the switch for cryptocurrency traders. If an on-chain platform can tap into multiple reserves, and lower the barriers of switching from one exchange to another by working with various wallet providers, then users can log into their wallets and execute a token conversion without ever leaving their wallets.

This allows receipts to access payments from any token that a decentralized platform supports.

Token-to-token convertibility is not the only approach to solving the liquidity challenge. There are many other unique ideas on how to help users execute cross-network transactions seamlessly and at reasonable rates – and these solutions are opening up entirely new ways for the greater public to participate in the cryptocurrency ecosystem.

Furthermore, liquidity is not the only factor in the adoption of the technology, but it stands to be a critical component in how the market matures. Promoting liquidity in the blockchain ecosystem, and specifically in decentralized exchanges, will be key to improving the general public's perception of cryptocurrencies as a valuable way to trade currencies safely and securely.

What is mining in a nutshell

One last thing: why is it called mining? In the original analogy, people who performed this essential work were compared to gold miners digging the gold out of the ground so that everyone could use it. But in reality, Bitcoin "miners" are just running computer programs on very specialised hardware that automates the process of securing the network. To sum up, this software

• Collects transactions from the network
• Validates them, and doesn't allow conflicting ones
• Puts them into large bundles called blocks
• Computes cryptographic hashes over and over until if finds one "good enough to count"
• Then submits the block to the network, adding it to the block chain and earning a reward in return.

That's mining in a nutshell!

Bitcoin Cash Hard Forks In Bid to Ease Mining Difficulties

Bitcoin cash appears to be successfully navigating a planned hard fork.

At press time, the majority of the network nodes (roughly 82 percent) have transitioned to new software (version 0.16.0 or later) that includes rules aimed at making the protocol's reward distribution more attractive to the miners that secure its blockchain.

Executed at roughly 21:00 UTC, the new version of the bitcoin cash blockchain has since amassed six blocks, while none have yet been mined on the older network. The results suggest that, while still possible, the fork will pass without the creation of a competing cryptocurrency.

As reported by CoinDesk, today's hard fork looks to switch the protocol to a different mining algorithm that will favorably adjust how hard it is for miners to create new blocks roughly every 600 seconds.

The idea is that by doing so, bitcoin cash will avoid the sudden changes in difficulty that have encouraged large numbers of miners to switch frequently between the bitcoin and bitcoin cash blockchains, migrating to whatever version is offering the most in terms of rewards.

Kept intact will be the rules that caused the creation of the cryptocurrency, which hard forked off of the main bitcoin blockchain in August by way of code that increased its block size to 8 MB, up from 1 MB on bitcoin.

Smooth upgrade

But it's the necessity of the mining change that has many thinking the upgrade will be smooth.

In remarks, Haipo Yang and Jiang Zhuoer, two major mining pool operators, said they didn't expect the change to be contentious. Other users, speaking in WeChat channels dedicated to the cryptocurrency, voiced similar statements of support for the measure.

This is due in part to the mining algorithm, which they acknowledged as having produced wild fluctuations in hash rate in the past. Developers have largely agreed.

According to the blog post outlining the hard fork and the updated software, the current rule is "problematic because it prevents consistently fast confirmations for users, and radically shifts the coin issuance schedule."

In this way, Juan Garavaglia, a developer working to coordinate the fork sought to label it as successful, indicating his optimism that the majority of the bitcoin cash network will update.

"For [the] fork... economically relevant and miners [nodes] are the critical ones," he said.

Already, startups including Yours and Ledger have migrated software.

Cash and carry

Should the software upgrade ultimately hold, it could bode well for bitcoin cash.

The protocol's supporters are arguably more encouraged about the network's future with the suspension of the Segwit2x hard fork, scheduled to occur on bitcoin last week. A controversial scaling proposal drafted by a group of miners and bitcoin businesses, Segwit2x looked to increase the bitcoin block size from 1 MB to 2 MB by way of a hard fork.

Still, with the measure failed, its supporters appear to be migrating to alternatives. This weekend saw bitcoin cash rise to a value of nearly $2,000, an all-time high, though analysts differed on whether this amounts to lasting (or even real) support for the network.

At the same time, money talks, and already at least one smaller miner indicated they're following the situation, possibly hinting at the psychological factors at play in the market.

Yimo Cheng, a China-based tax accountant who mines bitcoin out of his home, said he hasn't yet started mining bitcoin cash for concerns about its ownership being concentrated among Chinese buyers.

And while he believes bitcoin is "more international," he ultimately said he would continue to monitor how the dynamic between the two blockchains developers.

He resolved:

"I will observe it for a while."

Proof of work v Proof of Stake

Recently you might have heard about the idea to move from an Ethereum consensus based on the Proof of Work (PoW) system to one based on the so-called Proof of Stake.

In this article, I will explain to you the main differences between Proof of Work vs Proof of Stake and I will provide you a definition of mining, or the process new digital currencies are released through the network.

Also, what will change regarding mining techniques if the Ethereum community decides to do the transition from “work” to “stake”?

This article wants to be a basic guide to understanding the problem above.

What is the Proof of work?

First of all, let’s start with basic definitions.

Proof of work is a protocol that has the main goal of deterring cyber-attacks such as a distributed denial-of-service attack (DDoS) which has the purpose of exhausting the resources of a computer system by sending multiple fake requests.

The Proof of work concept existed even before bitcoin, but Satoshi Nakamoto applied this technique to his/her – we still don’t know who Nakamoto really is – digital currency revolutionizing the way traditional transactions are set.

In fact, PoW idea was originally published by Cynthia Dwork and Moni Naor back in 1993, but the term “proof of work” was coined by Markus Jakobsson and Ari Juels in a document published in 1999.

But, returning to date, Proof of work is maybe the biggest idea behind the Nakamoto’s Bitcoin white paper – published back in 2008 – because it allows trustless and distributed consensus.

What’s trustless and distributed consensus?

A trustless and distributed consensus system means that if you want to send and/or receive money from someone you don’t need to trust in third-party services.

When you use traditional methods of payment, you need to trust in a third party to set your transaction (e.g. Visa, Mastercard, PayPal, banks). They keep their own private register which stores transactions history and balances of each account.

The common example to better explain this behavior is the following: if Alice sent Bob $100, the trusted third-party service would debit Alice’s account and credit Bob’s one, so they both have to trust this third-party is to going do the right thing.

With bitcoin and a few other digital currencies, everyone has a copy of the ledger (blockchain), so no one has to trust in third parties, because anyone can directly verify the information written.

Proof of work and mining

Going deeper, proof of work is a requirement to define an expensive computer calculation, also called mining, that needs to be performed in order to create a new group of trustless transactions (the so-called block) on a distributed ledger called blockchain.

Mining serves as two purposes:

1. To verify the legitimacy of a transaction, or avoiding the so-called double-spending;
2. To create new digital currencies by rewarding miners for performing the previous task.

When you want to set a transaction this is what happens behind the scenes:

• Transactions are bundled together into what we call a block;
• Miners verify that transactions within each block are legitimate;
• To do so, miners should solve a mathematical puzzle known as proof-of-work problem;
• A reward is given to the first miner who solves each blocks problem;
• Verified transactions are stored in the public blockchain

This “mathematical puzzle” has a key feature: asymmetry. The work, in fact, must be moderately hard on the requester side but easy to check for the network. This idea is also known as a CPU cost function, client puzzle, computational puzzle or CPU pricing function.

All the network miners compete to be the first to find a solution for the mathematical problem that concerns the candidate block, a problem that cannot be solved in other ways than through brute force so that essentially requires a huge number of attempts.

When a miner finally finds the right solution, he/she announces it to the whole network at the same time, receiving a cryptocurrency prize (the reward) provided by the protocol.

From a technical point of view, mining process is an operation of inverse hashing: it determines a number (nonce), so the cryptographic hash algorithm of block data results in less than a given threshold.

This threshold, called difficulty, is what determines the competitive nature of mining: more computing power is added to the network, the higher this parameter increases, increasing also the average number of calculations needed to create a new block. This method also increases the cost of the block creation, pushing miners to improve the efficiency of their mining systems to maintain a positive economic balance. This parameter update should occur approximately every 14 days, and a new block is generated every 10 minutes.

Proof of work is not only used by the bitcoin blockchain but also by ethereum and many other blockchains.

Some functions of the proof of work system are different because created specifically for each blockchain, but now I don’t want to confuse your ideas with too technical data.

The important thing you need to understand is that now Ethereum developers want to turn the tables, using a new consensus system called proof of stake.

What is a proof of stake?

Proof of stake is a different way to validate transactions based and achieve the distributed consensus.

It is still an algorithm, and the purpose is the same of the proof of work, but the process to reach the goal is quite different.

Proof of stake first idea was suggested on the bitcointalk forum back in 2011, but the first digital currency to use this method was Peercoin in 2012, together with ShadowCash, Nxt, BlackCoin, NuShares/NuBits, Qora and Nav Coin.

Unlike the proof-of-Work, where the algorithm rewards miners who solve mathematical problems with the goal of validating transactions and creating new blocks, with the proof of stake, the creator of a new block is chosen in a deterministic way, depending on its wealth, also defined as stake.

No block reward

Also, all the digital currencies are previously created in the beginning, and their number never changes.

This means that in the PoS system there is no block reward, so, the miners take the transaction fees.

This is why, in fact, in this PoS system miners are called forgers, instead.

Why Ethereum wants to use PoS?

The Ethereum community and its creator, Vitalik Buterin, are planning to do a hard fork to make a transition from proof of work to proof of stake.

But why they want to switch from one to the other?

In a distributed consensus-based on the proof of Work, miners need a lot of energy. One Bitcoin transaction required the same amount of electricity as powering 1.57 American households for one day (data from 2015).

And these energy costs are paid with fiat currencies, leading to a constant downward pressure on the digital currency value.

In a recent research, experts argued that bitcoin transactions may consume as much electricity as Denmark by 2020.

Developers are pretty worried about this problem, and the Ethereum community wants to exploit the proof of stake method for a more greener and cheaper distributed form of consensus.

Also, rewards for the creation of a new block are different: with Proof-of-Work, the miner may potentially own none of the digital currency he/she is mining.

In Proof-of-Stake, forgers are always those who own the coins minted.

How are forgers selected?

If Casper (the new proof of stake consensus protocol) will be implemented, there will exist a validator pool. Users can join this pool to be selected as the forger. This process will be available through a function of calling the Casper contract and sending Ether – or the coin who powers the Ethereum network – together with it.

“There is no priority scheme for getting inducted into the validator pool itself; anyone can join in any round they want, irrespective of the number of other joiners,” he continued.

The reward of each validator will be “somewhere around 2-15%, ” but he is not sure yet.

Also, Buterin argued that there will be no imposed limit on the number of active validators (or forgers), but it will be regulated economically by cutting the interest rate if there are too many validators and increasing the reward if there are too few.

A safer system?

Any computer system wants to be free from the possibility of hacker attacks, especially if the service is related to money.

So, the main problem is: proof of stake is safer than proof of work?

Experts are worried about it, and there are several skeptics in the community.

Using a Proof-of-Work system, bad actors are cut out thanks to technological and economic disincentives.

In fact, programming an attack to a PoW network is very expensive, and you would need more money than you can be able to steal.

Instead, the underlying PoS algorithm must be as bulletproof as possible because, without especially penalties, a proof of stake-based network could be cheaper to attack.

To solve this issue, Buterin created the Casper protocol, designing an algorithm that can use the set some circumstances under which a bad validator might lose their deposit.

He explained: “Economic finality is accomplished in Casper by requiring validators to submit deposits to participate, and taking away their deposits if the protocol determines that they acted in some way that violates some set of rules (‘slashing conditions’).”

Slashing conditions refer to the circumstances above or laws that a user is not supposed to break.

Conclusion

Thanks to a PoS system validators do not have to use their computing power because the only factors that influence their chances are the total number of their own coins and current complexity of the network.

So this possible future switch from PoW to PoS may provide the following benefits:

1. Energy savings;
2. A safer network as attacks become more expensive: if a hacker would like to buy 51% of the total number of coins, the market reacts by fast price appreciation.

This way, CASPER will be a security deposit protocol that relies on an economic consensus system. Nodes (or the validators) must pay a security deposit in order to be part of the consensus thanks to the new blocks creation. Casper protocol will determine the specific amount of rewards received by the validators thanks to its control over security deposits.

If one validator creates an “invalid” block, his security deposit will be deleted, as well as his privilege to be part of the network consensus.

In other words, the Casper security system is based on something like bets. In a PoS-based system, bets are the transactions that, according to the consensus rules, will reward their validator with a money prize together with each chain that the validator has bet on.

So, Casper is based on the idea that validators will bet according to the others’ bets and leave positive feedbacks that are able accelerates consensus. 

Bitcoin Gold: What you need to know

There’s a Bitcoin hard fork around the corner and it’s not 2x. Announced right before Bitcoin Cash forked, Bitcoin Gold is scheduled to go live sometime in November. In this article, I’m going to explain what Bitcoin Gold is, how and when it will hard fork and what you’ll need to do to prepare.

What is Bitcoin Gold?

Bitcoin Gold is the brainchild of Jack Liao and is launching as a hard fork of Bitcoin. The goal of BTG is to become a better gold than Bitcoin. The chief way they have decided to do this is trying to solve miner centralization through a proof-of-work change.

Changing proof-of-work is generally going to require a hard fork and BTG has decided to go that route. The proof-of-work that they’ve chosen is Equihash, a memory-hard algorithm that’s fairly ASIC resistant and also used by ZCash. The idea is to give mining back to the users who can start using CPUs and GPUs to mine.

BTG developers are also considering a premine of up to 1%. How that will be executed is unclear, but will probably consist of taking some of the mining reward as they’re committed to keeping BTG at the 21 million limit.

What’s so special about ASIC resistance?

ASICs are Application Specific Integrated Circuits. They’re different from CPUs in that they do only one thing, but they do it really, really well.

Bitcoin mining is currently completely dominated by ASICs, mostly produced by Bitmain, Bitfury and Canaan. This is largely due to the proof-of-work function (SHA256) being reasonably simple and not requiring much RAM. Equihash, on the other hand, is a pretty complex hashing function and requires a lot of RAM to perform. That means it’s much more expensive to produce ASICs for Equihash and the speed gain isn’t nearly as much.

To give you an idea, a normal CPU can mine SHA256 at around 5–10 MH/s. An ASIC can mine SHA256 at around 5–10 TH/s, or about 1 million times more work per second than a CPU can. By comparison, a normal CPU can mine Equihash at around 10–30 H/s, where as specialized equipment can do something like 1000–3000 H/s, or about 100 times more work per second.

In other words, the playing field is a lot more level with Equihash than SHA256 due to the ASIC-resistance. Of course, it’s hard to know how much economics would change if Equihash were to become as profitable, but suffice it to say that the efficiency gain would still be much less than SHA256.

When are they going to Hard Fork?

Their plan is to pick a block on October 25, 2017 to fork from, hence the date on their webpage. That does not mean that their coin launches on that day, just that the Bitcoin blockchain gets frozen for the BTG chain on that day and new BTG blocks built on top later.

Currently, they are planning an early November release, which means that their blockchain will have no blocks for a week or so in between.

The Bitcoin Gold developers plan to create a testnet sometime in mid-to-late October. They’ll make their software available soon after.

What does it mean for me?

Bitcoin Gold will only affect you if you own Bitcoin when they pick the hard fork block, that is, around October 25. You will receive the exact amount of Bitcoin Gold as Bitcoin you hold at that block.

They are planning strong replay protection, so you probably won’t have to worry about replay attacks. However, you will most likely need to download a wallet or construct transactions manually to be able to move your Bitcoin Gold tokens.

Basically, if Bitcoin Gold isn’t worth very much (less than 0.0001 BTC or so), it’s probably not worth doing anything. If it’s actually worth something (say 0.01 BTC or higher), there will be tools that wallet developers will most likely write so you can access your Bitcoin Gold.

If you have your Bitcoins on an exchange, the exchange will likely credit you with your Bitcoin Gold eventually. This will especially be true if BTG has value above 0.01 BTC. Generally, it’s better to control your own private keys as that gives you the most flexibility. That said, the fiduciary duty any exchange or merchant has when they take possession of your Bitcoin means they probably have to give you the Bitcoin Gold due to you.

Conclusion

Bitcoin Gold is another hard fork that will bring some changes to the ecosystem. If you’re a holder, there isn’t that much to fear here, and there may be some free money in it for you! If you’re a developer for any wallet or exchange, that’s another story.