Scribe-spotted

Keep it light

2015-11-02T12:23:51Z

Discussed in the House of Lords (Eerste Kamer) in The Hague on 1 October 2015:

The conference was about ‘Contours of the Third Century of the Dutch Kingdom’ in the House of Lords (Eerste Kamer) at the Binnenhof in The Hague. The seminar was organized by the Scientific Advisory Board of the Dutch Government (WRR) and marked the end of all the festivities of ‘Two hunderd years Dutch kingdom’. My presentation was on globalization, the retreat of the nationstate and the future of Dutch cities. Most of the lectures in the morning were about democracy, citizenship and the Dutch constitution. Many complaints were heard, but I really felt a lack of imagination; it was almost depressing. Andreas Kinnegin, professor philosophy of law at Leyden University, was quite pessimistic (he warned for the tyranny of the state and the disappearance of the protestant ethos), so was Kustaw Bessems, historian and journalist of de Volkskrant (who warned for islamic antidemocratic acts). His message: we are living in the best possible world, it will get worse. Even Jonathan Holslag of the Free University of Brussels was negative in his analysis of the international geopolitical situation. Nothing to be proud of. Scary even.

It reminded me of the lecture of Peter MacFadyen at the ‘Flatpack Democracy’ event of last Saturday in Brighton, UK. Peter had told us about creating independent politics in Frome, Somerset, south of Bath. After years of missed opportunities, a group of residents had taken control of their town council and had set about making politics relevant, effective and fun again. Frome counts 26.000 inhabitants. Its political system lacked vitality, people didn’t feel represented any more. Peter: “Britain today has a dysfunctional political system. Many politicians are making decisions to meet their own needs or those of their party, not the needs of the people they serve.” In detail he described how citizens took control of the system and searched for a radical democracy, without making use of political parties. “The underlying ethos of all our actions is to build confidence and facilitate opportunity.” MacFadyan’s speech inspired many in the audience who apparently do not feel represented after the last election too, when most of the UK turned ‘blue’. MacFadyen gave a manual of how to develop a political system from the bottom-up. Essentials: work as a group, agree your ways of working together, use facilitators, friends, experts, people with skills, keep it light, decide on a good name. He told us it works. Why not?

GCHQ tried to track Web visits of “every visible user on Internet”

2015-11-02T12:23:51Z

Designing a Global Fabric for Finance (G3F)

2015-11-02T12:23:51Z

Over the past two weeks there have been a number of news stories related to R3 — a fintech startup that I now work at. The first of which was from the Financial Times, entitled Blockchain initiative backed by nine large investment banks. Today we announced an additional 13 banks have joined our effort.

Although I cannot speak for the whole team, I can give you the vision I have with the aim of bringing clarity to the various bits of information that have been circulating.

Homework

Over the past year, the R3 team has spent copious amounts of time conducting due diligence on the greater “distributed ledger” or “shared ledger” space. I joined as an advisor in January when they were already knee deep in the task; I am now Director of Market Research.

What I and several others on the team found is that while there were a number of orthogonally useful pieces floating around (such as multisig and ideas like Engima), none of the publicly available technology platforms that has been funded by venture capital provided a flexible, holistic base layer with the specific functional requirements for secure, scalable enterprise use.

This includes incorporating non-functionals that globally regulated financial institutions must adhere to such as: compliance, privacy, reporting and reconciliation. Similarly, many of the venture funded projects also failed to address the business requirements of these same institutions.

In sportsball terms, the nascent industry is 0-for-2 in their current approach.

Some of that is understandable; for example, Bitcoin solves a set of problems for a niche group of individuals operating under certain security assumptions (e.g., cypherpunks not wanting to interface with banks or governments). Regulated financial institutions do not operate under those assumptions, thus axiomatically Bitcoin in its current form is highly unlikely to be a solution to their problems at this time. As a consequence, the technology solutions pitched by many of these startups are hammers looking for nails that do not exist in the off-chain world.

R3 is not a Bitcoin company nor a cryptocurrency company. We are not seeking to build a “better” or even a different type of virtual currency. Why not? Instead of starting with a known solution, such as a spreadsheet, we are starting with the problem set which continually influences the customized solution. This is one of the biggest reasons I was attracted to this specific effort: R3 is not a re-enactment of Field of Dreams. Build it with the hopes that someone will come is the siren song, the motto even, for throngs of failed startups.

But weren’t the original shared ledgers — often called blockchains — robust enough to protect all types of assets and a legion of use-cases?

Many public ledgers were originally designed to secure endogenous, on-chain information (e.g., the native token) but in their current incarnations are not fit for purpose to handle off-chain titles. For instance, Bitcoin was not initially designed to secure exogenous data — such as transmitting high-value off-chain securities — vis-a-vis pseudonymous miners. And it appears all attempts to mutate Bitcoin itself into a system that does, ends up creating a less secure and very expensive P-o-P network.

What are we doing then?

Rather than try to graft and gerrymander our business requirements onto solutions designed for other problems, we are systematically looking at a cornucopia of challenges and cost-drivers that currently exist at financial institutions. We will seek to address some of these drivers with a generalized agnostic fabric, with layers that fulfill the critical infrastructure specifications of large enterprises and with services that can be run on top in a compliant fashion.

What is a Global Fabric for Finance (G3F) then? If you had the chance to build a new financial information network from scratch that incorporated some of the elements and learnings of the shared ledger world, what would it look like?

For starters, a fabric specifically built for and by trusted parties does not need something akin to mining or block rewards. In fact, not only is there is no Sybil spoofing problem on a trusted network but there are already many known, existing methods for securely maintaining a transaction processing system. Consequently, needing a block reward may (or may not) be a red herring and has likely been a costly, distracting sideshow to other types of utility that this technology represents.

If trust is not an issue, what use (as Arvind Narayanan and certain high profile enthusiasts have asked) is any part of the shared ledger toolkit? There are a number of uses, many of which I touched on in a paper back in April.

What about specific use-cases?

While a number of ideas that have surfaced at conferences and media events over the past summer, R3 remains focused on an approach of exploration and ideation.

And while there will likely be some isolated tests on some use-case(s) in sand boxes in the coming year, it is important to reflect on the G3F vision which will be further elaborated on by Richard Brown (our head of technology) in the coming weeks. If the fabric is only capable of handling one or two specific asset classes, it will fall short of the mandate of being a generalized fabric used to secure financial information for enterprises.

Why directly work with banks during this formative stage? Why not just raise money and start building and shipping code?

To be frank, if financial institutions and regulatory bodies are not involved and engaged from the beginning, then whatever fabric created will likely: 1) fail to be viewed as an authoritative and legal record of truth and 2) fall short of adequately address their exacting needs. It would be a non-starter for a financial institution to use technology that is neither secure, or whose on-chain record is considered non-canonical by off-chain authorities.

What does that mean?

While some in the shared ledger community would like to believe that dry, on-chain code supersedes off-chain wet-code, the facts on the ground continue to contradict that thesis. Therefore, if you are going to create a non-stealth fintech startup, it must be assumed that whatever products and services you create will need to operate under existing laws. Otherwise you will spend most of your time hiding out in remote Caribbean islands or Thailand.

Growth

The R3 team is comprised of pragmatic thinkers and doers, experienced professionals who understand that a financial system cannot be built with up and down votes on reddit or whose transaction processors may reside in sanctioned countries.

Source: XKCD

While nothing is finalized at the time of this writing, it is our aim at R3 to make the underlying base layer of this fabric both open sourced and an open standard.

After all, a foundation layer this critical would benefit from the collective eyeballs of the entire programming community. It also bears mentioning that the root layer may or may not even be a chain of hashed blocks.

Furthermore, we are very cognizant of the fact that the graveyard for building industry standards is deep and wide. Yet, as I mentioned to IBT, failing to create a universal standard will likely result in additional Balkanization, recreating the same silos that exist today and nullifying the core utility of a shared ledger.

It is a pretty exciting time in modern history, where being a nerd — even a cryptonerd — means you are asked to appear on stage in front of decision makers, policy makers, captains of industry and social media influencers. Some even get to appear in person and not just as a telepresence robot. Yet as neat as some of the moon math and cryptographic wizardry may be, failing to commercialize it in a sustainable manner could leave many of the innovative forks, libraries and github repos no more than starry-eyed science fair projects.

To that end, we are currently hiring talented developers keen on building a scalable, secure network. In addition, rather than reinventing the wheel, we are also open to partnerships with existing technology providers who may hold key pieces to building a unified standard. I am excited to be part of this mathematical industrial revolution, it’s time to strike while the iron is hot and turn good academic ideas into commercial reality. Feel free to contact us.

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Fun Palace

2015-11-02T12:23:51Z

Article note: Zef Hemel is new to my feeds this week after seeing him talk at @connectBTN on Friday

Read in the Guardian of 19 February 2015:

The other conference I visited this weekend was ‘Flatpack Democracy Brighton’. They made me member of a forum. I told the audience about how to build local platforms of citizen-amateurs that can generate collective intelligence. Just when I was leaving the conference, Daniel Bernstein of The Synergy Centre told me my plan to erect a People’s Industry Palace in Amsterdam next year with the help of artists reminded him of Stella Duffy’s Fun Palaces initiative. Duffy is a British writer and theatre-maker. In the Guardian of 19 February 2015 she wrote about her Fun Palaces network: “At Fun Palaces we want to do away with the idea of excellence and experts altogether, especially around subsidy, and demand instead an excellence of engagement and participation.” All the Fun Palaces are local, embedded in their own communities. Artists are working with neighbours, local councillors and public buildings, to make great, inclusive work – and making it locally. “There’s a real joy in contributing to our communities, right where we are.” In 2014 more than 3.000 people across the UK signed up to make local Fun Palaces.

Just that morning Jenni had showed me the Royal Pavilion of the Prince Regent, which she had called a ‘party palace’. Striking. Back home I read new writings of Duffy in the Guardian. She announced that on 3 and 4 October in more than 130 locations across the UK locally led, community-driven, arts and sciences events will take place. Instead of new buildings, these cultural events will be focused on people. “Bricks and mortar will never replace dialogue.” Joan Littlewood and Cedric Price had inspired her. In 1961 these two architects had made designs for a venue where you could “choose what you want to do or watch someone else doing it. Learn how to handle tools, paint, babies, machinery, or just listen to your favourite tune. Dance, talk or be lifted up …. sit out over space with a drink and tune in to what’s happening.” While reading the text, I could only think of ‘Volksvlijt’. By choosing the new public library in Amsterdam as a pop-up People’s Industry Palace we are aiming exactly the same: truly welcoming everyone to participate in the cultural and economic life of the city. And yes, “those running our buildings might have to give up a little control for it to work.”

Half-caste

2015-11-02T12:23:51Z

Article note: Mixed identity, no identity, self identity.

Who Am I isn't a question I spend much time thinking about, but it's sufficiently complicated that when I do, I can't quite get a handle on it.

My dad was from north London. My mum's Indian, and what we'd call now a first generation economic migrant -- she moved from Kenya to the UK at 18, for work. Met my dad, married, etc. She was born middle-class in Kenya, until relatively recently she'd never been to India: Technically her ethnic group is "East African Indian."

So her family was part of the Indian diaspora. Her dad - my grandfather - my Nanabapa - was himself a migrant, albeit he was three years old when he was brought by his family to Mombasa from the Indian subcontinent.

What does being a migrant mean to your sense of identity? To be Indian in east Africa; to be ethnically Indian in London... but not part of the larger, more cohesive British Asian community? Displaced over generations. What does it feel like? What's passed on? Apart from the obvious empathies I mean. What subtle, secret gifts have I been given? I don't know. Food is love. The family is Ismaili, it's a pretty liberal branch of Islam, and I have a pretty liberal family.

I'm mixed race, but I don't look it. I look white. I grew up in a particularly white part of the UK, I speak only English, I've never set foot in a mosque. I've been to India on work, and to watch the cricket. Every so often white-appearing people say mildly racist things to me, or mildly Islamophobic things, expecting I'm like them. I'm not.

(Nairobi: Sitting at the back of my grandparents' house eating fried egg and chips and buttered chapatis. The smell of the red soil after the rain.)

Being half Indian and not looking it. I'm met with scepticism when I tell people, white, Indian, and mixed. It's another kind of displacement. What I'm allowed to claim and what I'm not. It can feel like I have a tenuous grip on my background, on my ability to honour my origins.

Sometimes when I imagine my identity, I feel instead an allegiance to the people of the future -- 22nd century people of tangled roots and chai skin.

But we were on holiday in Sicily the last couple of weeks, and we got talking to a few young Sicilians. The culture of Sicily is incredible, Greece, Carthage and Rome all on top of one another; Norman castles with Arabic interiors; halfway between Africa and Europe, a powerful centre to the Mediterranean. People there have light hair and dark hair, brown eyes and blue eyes, all shades. Italian. We were chatting to one light-haired girl and her dark boyfriend: I'm Norman, she said, He's Arab.

The Normans were Vikings who settled in France. They invaded England (and won). They came to Sicily a decade or two short of a thousand years ago. A thousand. The Arabs: Twelve hundred years ago. I'm Norman, he's Arab.

I have a thousand hedged affiliations. Half-caste, is what we used to call ourselves when we were little, watching out for the shocked look in response when we said those crude words. I'm proud, is what I am.

Bank of England Chief Economist: Blockchain-based Digital Currency Issued by Central Banks Could Replace Cash

2015-11-02T12:23:51Z

Article note: Interesting note on how you can or can't tax physical cash or remove it from circulation...

In a talk given at the Portadown Chamber of Commerce in Northern Ireland on September 18, Andrew G Haldane, Chief Economist at the Bank of England (BoE), has hinted at the possibility that the U.K. government might issue a digital currency. Though the disclaimer “The views are not necessarily those of the Bank of England or the Monetary Policy Committee” ensures plausible deniability, Haldane’s talk seems to indicate that the BoE is at least seriously considering the possibility.

Haldane is chief economist at the BoE and executive director of monetary analysis and statistics. Listed by Time Magazine in 2014 as one of the 100 most influential people in the world, Haldane is a member of BoE’s Monetary Policy Committee and oversees research and statistics across the bank.

Haldane focuses on the inability of central banks to set negative interest rates to stimulate economic growth, which hinders the effectiveness of monetary policy and is known as the Zero Lower Bound (ZLB) problem.

“A central bank cannot reduce nominal interest rates below zero,” explained a 2014 IMF working paper cited by Haldane. “This constraint arises from the existence of an asset, cash, with a guaranteed return of zero. A negative interest rate would mean that someone lends $100 and receives less than $100 in the future. Such a loan would never occur, because the lender could do better by putting cash in a safe deposit box.”

Therefore, Haldane suggests looking for technological means for implementing a negative interest rate on physical currency. More than a century ago, German economist Silvio Gesell proposed a stamp tax on currency to generate a negative interest rate. Modern variants of the stamp tax on currency have been proposed – for example, by randomly invalidating banknotes by serial number.

Another possibility is to abolish paper currency, which would also represent a way to fight criminal activities that rely on cash exchange.

Yet another possibility would be to issue government-backed currency in an electronic rather than paper form.

“This would preserve the social convention of a state-issued unit of account and medium of exchange, albeit with currency now held in digital rather than physical wallets,” says Haldane. “But it would allow negative interest rates to be levied on currency easily and speedily, so relaxing the ZLB constraint.”

Haldane observes that the technology underpinning digital currencies has changed rapidly over the past few years, due to the emergence of Bitcoin and crypto-currencies.

“What I think is now reasonably clear is that the distributed payment technology embodied in Bitcoin has real potential,” says Haldane. “On the face of it, it solves a deep problem in monetary economics: how to establish trust – the essence of money – in a distributed network. Bitcoin’s “blockchain” technology appears to offer an imaginative solution to that distributed trust problem.”

Whether a variant of this technology could support central bank-issued digital currency, and whether the public would accept it as a substitute for paper currency, are, according to Haldane, open questions that do not have easy answers.

“That is why work on central bank-issued digital currencies forms a core part of the bank’s current research agenda,” concludes Haldane. “Although the hurdles to implementation are high, so too is the potential prize if the ZLB constraint could be slackened. Perhaps central bank money is ripe for its own great technological leap forward, prompted by the pressing demands of the ZLB.”

In a previous presentation, Haldane stated that digital currencies are “harder money” than a gold standard, because “sustained adoption would see ongoing deflation.” A few months ago the Bank of England published a research paper titled “Innovations in payment technologies and the emergence of digital currencies.”

“The distributed ledger is a genuine technological innovation that demonstrates that digital records can be held securely without any central authority,” reads the conclusion of the paper. A recent U.K. Treasury document titled “Digital Currencies: Response to the Call for Information” shows that the British government is interested in supporting and understanding blockchain-based digital fintech, and understands the potential benefits it could bring to society.

The post Bank of England Chief Economist: Blockchain-based Digital Currency Issued by Central Banks Could Replace Cash appeared first on Bitcoin Magazine.

Strange, ironic

2015-11-02T12:23:51Z

Heard in the Volkshotel, Amsterdam, on 17 September 2015:

Theme of the first Ruimtevolk College last week at the Volkshotel (People’s Hotel) in Amsterdam was ‘Foreign capital in the city’. Two professors of the University of Amsterdam, Ewald Engelen (financial geography) and me (urban planning), were asked to give a lecture on the subject. Engelen spoke first. His tone was agressive, angry, mad. It was, he told us, a lecture he had given in Antwerp last summer, his slides were just for him, for not getting lost in his anger. Between good and evil, for him there was a clear distinction; unlike a scientist he lacked any doubts. He accused the bankers, the entrepreneurs, the planners and the politicians for not stopping the madness of globalization. His tone was fiercely anti-urban: Amsterdam should stay small and successful cities are plundering the countryside. Now and then he raised his voice. His rhetoric and temper moved me. The hall was sold out, the air inside was hot and humid. You almost could feel the floor trembling. At a certain point I imagined there was Karl Marx standing in the middle of the Volkshotel (ironic name: People’s Hotel), an intellectual rousing the proletariat. Or was it Max Havelaar? I thought revolution might be coming.

I myself felt like Bakunin. My lecture was less clear. The title I had chosen was ‘Strange’, because the spatial trends I described are very obscure indeed. What we observe at this very moment is an extreme kind of spatial concentration of certain scalable phenomena: tourists, Airbnb, capital, expats, migrants, all global things, at the same time very localized. Some cities are growing fast, others are shrinking. It’s the process of globalization we’re in. Cities are being hit as if by thunder and lightning. What’s happening in London has nothing to do with the rest of the UK. The same holds for Amsterdam (on the picture: number of Airbnb dwellings in the Netherlands 2014). That’s why the world is looking more and more unequal, spiky, everything seems to be totally out of control. Mayors like Boris Johnson and Michael Bloomberg are pleading for devolution. They are right. You have to solve problems at the local level. But my lecture was to no avail, the audience just didn’t want to know. And Ewald Engelen started stirring up the masses again. When at last I got the chance to speak I tried to explain what is the difference between Engelen and me: Engelen thinks globalization is a project you can stop, while I think globalization is a process you have to deal with. Marx and Bakunin. I’m afraid Marx will win, again.

A History of the Future, Now Free

2015-11-02T12:23:51Z

Two years ago, A History of the Future in 100 Objects was published. The book describes a hundred slices of the future of everything, spanning politics, technology, art, religion, and entertainment. Some of the objects are described by future historians; others through found materials, short stories, or dialogues.

Today, I’m making all 100 chapters available online, for free.

The book has sold a few thousand copies – reasonably well for a first author. More importantly, it was received well by the people whose opinions I value; I was invited to speak at the Long Now Foundation last summer by Stewart Brand, and it was praised by the BBC’s Stephanie Flanders and by Grantland’s Kevin Nguyen, who called it one of the ‘overlooked books of 2013‘. Next month, I’ll be speaking about the same ideas at the Serpentine Gallery’s Transformation Marathon.

So, at this point I’m much more interested in spreading the ideas far and wide. Of course, you can still buy the book via Amazon or directly from me (it’s very nicely formatted), but I’m just as happy if you read it on the web.

I wrote A History of the Future in 100 Objects because I’ve always been deeply fascinated by what’s coming next. I’m a neuroscientist and experimental psychologist by training, and a games designer and CEO by trade. It’s my job to think up new ideas and ways to improve people’s lives, and perhaps because of that, I’m optimistic – cautiously, skeptically optimistic – about the future.

The future that I want to realise is the hard-fought utopia of Kim Stanley Robinson and Iain Banks and Vernor Vinge, not the dystopia that dominates fiction nowadays. But I’m not naive, and technoutopianism brings me out in hives, so don’t expect me to tell you that technology will make everything better.

This book is my small contribution to the exploration of the future. It turns out that writing a hundred short stories was far, far more difficult than I had ever imagined, and in truth only some of the chapters hit the mark perfectly. But even so, I think there are plenty of fun ideas there.

Where is the aggregate demand for cash coming from?

2015-11-02T12:23:51Z

A few days ago, I happened to be at an event where the Chief Cashier of the Bank of England gave an interesting speech about the trajectory of banknotes. These are important to the Bank of England, because the note issuing department of the bank is the most profitable nationalised industry in history. And demand for their product continues to grow.

Aggregate demand for Bank of England notes has grown quickly, increasing by around three-quarters over the past decade, and has outpaced the growth in GDP since the 1990s. Today there are nearly three-and-a-half billion notes in circulation, totalling over £60bn.

[From Working together to deliver banknotes for the modern economy – speech by Victoria Cleland | Bank of England]

But what was most interesting to me about the speech, since I don’t care about plastic banknotes and Victoria seemed most unenthusiastic about my campaign to have Sir Thomas Gresham replace the Queen on all British banknotes when I told her about it afterwards, was that she gave up heads up on today’s Bank of England Quarterly Review (3Q15), in which the Bank looks at cash usage. In the same speech, Victoria said that while “demand for cash as a medium of exchange appears broadly stable, its use as a store of value appears to have grown… We estimate that around 20% to 30% of total UK cash was in, what we refer to as, the ‘transactional cycle’ – cash held by banks, consumers, and retailers for the purposes of facilitating everyday transactions”.

In essence she said that their latest figures show that only about a quarter of the cash that they put into circulation is for transactional purposes (i.e., used). The rest of it is either shipped overseas (i.e., exported), which we will put to one side for the moment, kept outside of the banking system (i.e., hoarded) or used to support the shadow economy (i.e., stashed). In other words, not in circulation at all but stuffed under mattresses.

If you look at the trend growth of that cash “in circulation” over the last few years it has accelerated well ahead of trend GDP growth as well as past trend ATM withdrawal growth. And we also know that the use of cash in retailing has continued to fall steadily so the “cash gap” between the small amount of cash that is used to support the needs of commerce and the large amounts of cash that are used for other purposes has been growing. The interesting question that the Quarterly Bulletin article by Tom Fish and Roy Whymark stimulates is straightforward: “if the majority of Bank of England notes are not being used for everyday transactions in the domestic economy, what are they being used for?”

I was invited to write a comment piece on this for The Guardian, so having looked at the high level picture I thought it would be interesting to look at each category and what the key drivers in each of them might be. The first, cash that is used, is easy. We know that the driver is technology but that the impact is weak. In other words, new technology does reduce the amount of cash in circulation, but very slowly.

Moving on to the next category, I know it’s a rather simplistic analysis, but if the amount of cash that is being hoarded has been growing then that would tend to indicate that people have lost confidence in formal financial services or are happy to have loss, theft and inflation eat away their store of value while forgoing the safety and security of bank deposits irrespective of the value of the interest paid. The Bank say that “a small number of individuals hoard large amounts of cash” (Ken Dodd, rather famously, had £336,000 in suitcases in his attic) and so might account of a lot of the notes.

If, on the other hand the amount of cash that is being stashed has been growing then the Bank of England is facilitating an increasing tax gap that the rest of us are having to pay for. In this context cash is a mechanism for greatly reducing the cost of criminality while it remains a penalty on the poor who have to shoulder an unfair proportion of the cost of cash. In this case, we should expect to see a strategy to change this obviously suboptimal element of policy.

The amount of cash that is being exported is hard to calculate, although the Bank itself does comment that the £50 note (which makes up a fifth of the cash out there by value) is “primarily demanded by foreign exchange wholesalers abroad”. I suppose some of this may be transactional use for tourists and business people coming to the UK, and I suppose some of it may be hoarded, but surely the strong suspicion must be that these notes are going into stashes.

The Bank notes that “given the untraceable nature of cash” they cannot tell where cash is going. That’s true. I’m not suggesting we adopt the Chinese policy of having ATMs record the serial numbers of notes that they dispense and having cash recycling centres record the serial numbers of notes coming in to rectify this lack of data, but clearly we can look at some proxies to help us establish the rough proportions of used and hoarded, stashed and exported. The Bank says that it thinks around 25% is used and around 25% is hoarded, the rest stashed and exported. If most of the exported cash is stashed, then heading towards half of the cash out there is for, not to put to fine a point on it. criminals.

So where is the demand coming from? The Bank says that “no single source of demand is likely to have been behind the sustained growth” but I’m not so sure, because I think stashes have grown at the expense of hoards. In a fascinating paper that I looked at last year by Prof. Charles Goodhart (London School of Economics) and Jonathan Ashworth (UK economist at Morgan Stanley), they note that the ratio of currency to GDP in the UK has been rising and argue that the rapid growth in the shadow economy has been a key cause. If you look at the detailed figures, you can see that there was a jump in cash held outside of banks around about the time of the Northern Rock affair, but as public confidence in the banks was restored fairly quickly and the impact of low interest rates on hoarding behaviour seems pretty marginal, there must be some other explanation as to why the amount of cash out there kept rising. Two rather obvious factors that do seem to support the shape of the curve are the increase in VAT to 20% and the continuing rise in self-employment (this came up a couple of times in comments to The Guardian piece), both of which serve to reinforce the contribution of cash to the shadow economy. The Bank say that there is “limited research to confirm the extent of cash held for use in the shadow economy”, but Charles and Jonathan make a reasonable estimate that the shadow economy in the UK could have expanded by around 3% of UK GDP since the beginning of the current financial crisis.

While the BoE paper notes that academic evidence does not suggest the black economy is expanding in the UK

[From UK savers hoard at least £3bn of cash at home – FT.com]

According to Tax Justice UK, there were £100 billion in sales not declared to UK tax authorities that meant a tax loss of £40 billion in 2011/12 and that will rise to £47 billion this year. That sounds like expansion to me. The IMF have noted that while Her Majesty’s Revenue and Customs (HMRC) is not good at estimating losses outside the declared tax system, which is why their latest estimates for the tax gap are low at £33 billion for 2011/12. And while we all read about Starbucks and Google and other large corporates engaging in (entirely legal) tax avoidance, half of all tax evasion is down to SMEs and a further quarter down to individuals (according to HMRC). There are a awful lot of people not paying tax and simple calculations will show that the tax gap that can be attributed to cash is vastly greater than the seigniorage earned by the Bank on the note issue. Cash makes the government (i.e. us) considerably worse off.

In summary, I think think that the Bank’s view on hoarding is generous and that it is the shadow economy fuelling the growth in cash “in circulation”. There’s something wrong about this, especially when we know that the cost of cash falls unfairly on the poor. It is time for Bank of England to develop an active strategy to start reducing the amount of cash in circulation. For a start they could take a look at what’s been going on in Sweden where a broad alliance between the government, banks, trade unions (it is their members who get beaten up and stabbed in cash robberies) and Bjorn from ABBA has made it the first country in the world where the amount of cash “in circulation” is falling.

Next week we’ll take a look at the second part of the Quarterly Bulletin article about what might influence the demand for cash in the future.

Insanely cool

2015-11-02T12:23:51Z

Read in de Volkskrant of 30 May 2015:

On 20 May 2015 Louise Fresco published her weekly column in the Dutch newspaper NRC Handelsblad. That day it was on the future of Europe. Fresco is an expert in food production and president of the board of Wageningen University. Her column was a letter to the next generation, those who just finished their highschool and started studying. In a nutshell this is what she wrote: you will enter a Europe that is losing ground. Jobs will be difficult to find because Asian robotics and outsourced work will take over. You will be part of the internet of things, you will have nothing to hide. You will not write any longer, so grammar is of no use to you anymore. National governments will be the weakest level of administration, so you will no longer vote. Your parents will be worried, but that holds for every generation. The only thing that matters in your life is a goal. What is your dream?

Ten days later I read a portrait of Mark Rutte, the Dutch Prime-Minister, in de Volkskrant. Journalist Ariejan Korteweg characterized him as bionic, as an ‘invariable optimistic man-machine’. Everything about him is unknown, he wrote, nothing essential we know about his life or thoughts, except that he drives an old Saab and eats cheese in Zermatt. In every crisis he seems to behave cheerful. It reminded me of Mrs. Fresco’s column. Does the Prime-Minister have a vision on the future of this great country? Again, we simply don’t know. Or do we? Korteweg: some time ago Mr. Rutte compared the Netherlands with a piece of marble. The form, he said, is already there, you only have to free it by cutting the stone. “I think about Michelangelo, the man who drew the perfect proportioned David.” How will this David, hidden in marble, look? Mr. Rutte: “Just an insanely cool country.” He certainly is not in a position to be Michelangelo. Then who is? We, the people of course. And Fresco’s next generation. But mostly global forces, the space of flows.

Nine Top Global Banks Pool Resources to Fund R3 to Develop Digital Currency Standards

2015-11-02T12:23:51Z

Nine of the largest investment banks are planning to develop common standards for blockchain technology in an effort to broaden its use across financial services, The Financial Times reports.

The banks – Goldman Sachs, JPMorgan, Credit Suisse, Barclays, Commonwealth Bank of Australia, State Street, Royal Bank of Scotland (RBS), BBVA and UBS – will fund a startup called R3, formed by a New York-based group of trading and technology executives.

The banks will jointly contribute several millions of dollars, according to a person familiar with the talks. The funds are expected to go to a forthcoming Series A capital raising for R3.

The project will be led by R3 Founder and Managing Partner David Rutter, who served as CEO of electronic broking at ICAP, the world’s largest interdealer broker, from 2010 to 2013. Prior to ICAP, Rutter was co-owner of Prebon Yamane, last serving as chief executive officer for the Americas.

The R3 team is composed of a highly specialized team of financial services industry veterans, technologists, subject matter experts and new tech entrepreneurs especially focused on rethinking and improving the modern financial markets ecosystem. Rutter recruited another former ICAP trading executive, Nichola Hunter, to join R3. Richard Brown, a technology expert formerly with IBM UK, and Tim Swanson, a U.S.-based cryptocurrencies consultant, have also joined R3.

In addition to developing commercial applications, the project will seek to establish consistent standards and protocols for this emerging technology across the financial industry in order to facilitate broader adoption and gain a network effect, notes an R3 press release. The group will collaborate on research, experimentation, design, and engineering to help advance state-of-the-art enterprise-scale shared ledger solutions to meet banking requirements for security, reliability, performance, scalability and audit.

R3 and its bank partners will establish collaborative joint working groups to lead these efforts, which will leverage the R3 team as well as experts within the partner banks. The group will work within a collaborative lab environment or “sandbox” to test and validate distributed ledger prototypes and protocols.

“This partnership signals a significant commitment by the banks to collaboratively evaluate and apply this emerging technology to the global financial system,” said Rutter. “Our bank partners recognize the promise of distributed ledger technologies and their potential to transform financial market technology platforms where standards must be secure, scalable and adaptable.”

R3 is an innovation firm focused on building and empowering the next generation of global financial services technology, states the company’s website. R3 focuses on applications of cryptographic technology and distributed ledger-based protocols within global financial markets.

“If you’re looking to introduce applications with distributed ledger technologies to improve the financial markets, you can’t have each participant working to a different pattern,” said Christopher Murphy, global co-head of FX, rates and credit at UBS.

R3 is bringing a consensus, which could establish common standards, he said.

“The collaborative model we’ve established with R3 and the other banks is a very effective way to deliver robust shared ledger solutions to the financial services sector,” said Kevin Hanley, director of design at RBS. “Right now you’re seeing significant money and time being spent on exploration of these technologies in a fractured way that lacks the strategic, coordinated vision so critical to timely success. The R3 model is changing the game.”

“These new technologies could transform how financial transactions are recorded, reconciled and reported – all with additional security, lower error rates and significant cost reductions,” said Hu Liang, senior vice president and head of emerging technologies at State Street. “R3 has the people and approach to drive this effort and increase the likelihood of successfully advancing the new technology in the financial industry.”

The post Nine Top Global Banks Pool Resources to Fund R3 to Develop Digital Currency Standards appeared first on Bitcoin Magazine.

Bitcoin Must Be About the Mission Rather than the Money, Says MIT Media Lab Founder Nicholas Negroponte at Scaling Bitcoin

2015-11-02T12:23:51Z

Legendary Internet pioneer Nicholas Negroponte, a founder of the MIT Media Lab and the One Laptop per Child initiative (OLPC), gave a controversial talk at the Scaling Bitcoin workshop in Montreal.

The Scaling Bitcoin workshop has been focused on how to safely improve the scalability and decentralized nature of the Bitcoin network, and included many technical talks on current issues such as the block-size debate and proposed enhancements such as lightning networks.

But Negroponte chose to keep away from these technical implementation details and focus on the big picture, the “raison d’être” of Bitcoin, its political dimension, and its implications for the evolution of society, with a high-level approach similar to that of his 1995 book “Being Digital” on the future of the then-emerging Internet.

Negroponte mentioned his past involvement with DigiCash, an electronic money corporation founded by cryptographer David Chaum in 1989. DigiCash, which pioneered anonymous digital transactions and is often considered a conceptual precursor of Bitcoin, declared bankruptcy in 1998. Negroponte was an investor and the first chairman.

“Chaum’s raison d’être was electronic privacy, and his plans for DigiCash were ambitious,” noted a Forbes article titled “Requiem for a Bright Idea” published after the DigiCash went out of business. “Digital pseudonyms would protect the identity of Netizens as they roamed the Web. Chaum became a hero to cyberlibertarians.”

Despite his past involvement with DigiCash and the idea of electronic transactions, Negroponte definitely doesn’t come across as a cyberlibertarian. On the contrary, he self-identifies as a socialist. “If it’s not clear, I am about as socialist as you can get,” says Negroponte at the beginning of the Q&A session after the talk. “I come from an era and a part of the world where socialism was viewed as good.”

Negroponte opened his talk with three anecdotes: the spontaneous use of sky lift e-tickets as a parallel currency by the people of a Swiss sky resort; his experience as target of cybercrime by hackers who impersonated him via email and stole a lot of money from his bank account, which he couldn’t recover even after the intervention of his brother John Negroponte, former U.S. Deputy Secretary of State; and his recent experiences in Greece when the banks were closed as a consequence of the Greek crisis.

Negroponte is firmly persuaded of the importance of Bitcoin.

“I can’t think of too many things that are more important than Bitcoin,” he said. “And don’t blow it. Don’t screw it up.”

Many people in the audience applauded at this point, including libertarians and crypto-anarchists, but these didn’t applaud much after Negroponte started to explain his thoughts on how to ensure a bright future for Bitcoin – with a socialist slant.

The worst thing entrepreneurs can do, according to Negroponte, is to consider Bitcoin as a get-rich-quick scheme, because treating Bitcon as such creates large price fluctuations and episodes that scare people away from Bitcoin. On the contrary, Bitcoin should be approached with a sense of mission – a mission to make the world a better place, he said. Negroponte urged the entrepreneurs in the audience to do non-profits.

Similar considerations apply beyond Bitcoin. Negroponte, who has been involved in about 60 startups himself, is critical of the startup culture. Today’s startups, according to Negroponte, cause enormous brain drain.

“Some of the smartest kids are being sucked out of society to do the stupid apps on some iPads with their girlfriends and boyfriends,” he said (another applause here), instead of working on big, hard problems. Here, Negroponte seems to agree with hardcore libertarian venture capitalist Peter Thiel, who, in an interview published on MIT Technology Review, exhorted entrepreneurs to go after bigger problems than the ones Silicon Valley is chasing.

“We wanted flying cars; instead we got 140 characters,” Thiel said.

Though the role of entrepreneurs and philanthropists in technology development is often emphasized, Negroponte thinks civil servants also have an important role to play. He considers roads, public transportation, education and the Internet itself as important parts of the infrastructure of a civil society, which should be developed by the government and made available to everyone at no cost.

Currency – including emerging digital currencies like Bitcoin – should also be part of the essential infrastructure provided by the government, he said. Bitcoin is important from a global point of view, said Negroponte, and could help creating much-needed global governance structures in an increasingly fragmented world.

“What’s wrong in being run by the government?” asked Negroponte, “If you think the government can’t run anything, go to Switzerland and ride a train.” He added that Finland has the world’s best education system, and no private schools. While acknowledging that there are lessons to be learned from libertarians, Negroponte sees an important role for the government to collect taxes and distribute benefits to everyone.

Negroponte’s talk, which is likely to provoke heated debates, can be interpreted as self-serving. In fact, the Digital Currency Initiative at MIT Media Lab, founded by Negroponte, is claiming a role of arbitration and leadership in Bitcoin developments, in prestigious academic settings far from get-rich-quick schemes, and Negroponte hinted at the Media Lab’s role at several points in the talk.

Photo Gin Kai / Wikimedia (CC)

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Home On The Server Range: Self-Hosted Future

2015-11-02T12:23:51Z

Been thinking about Lars TCF Holdhus’ “Self-Hosted Future” as statement, call-to-action and metaphor, and how that applies to my own shambolic (hi, Arden) practise.

With the personal determination that social media has entered the decadent days of the current cycle comes the determination that it must be either walked away from or misused. Lars pointed up something called sandstorm.io – Sandstorm “makes it easy to run your own server.” And, like withknown.com, has a managed-hosting solution for those of us who don’t have the time or knowledge to set up our own server. So, sure, not really self-hosted, but it’s nice when people like Sandstorm or Known refuse to remain arcane and difficult. And Lars isn’t dogmatic about that either. All good.

I keep returning to Amber Case’s term “calm technology” – again, as statement, CTA and particularly metaphor. And, perhaps, as a suggestion to calm the relationship with technology. Two or three tools like these can manage any number of other silo’d processes. Everything you need can be done from the homestead instance.

Half-formed thoughts. (In public.)

My newsletter goes out on Sundays, and you can subscribe at http://orbitaloperations.com.

Recreating Nature

2015-11-02T12:23:51Z

The Booth Museum is a wonderful showcase of Victorian taxidermy, but one of the main features of Edward Thomas Booth’s displays are the dioramas his birds are displayed in.

The typical manner of displaying taxidermied birds during the Victorian period was to have either individual specimens perched on a featureless wooden stand, or to have a mixture of birds mounted together in a scene which bore no resemblance to the animal’s natural habitat, and often alongside birds found in very different environments, countries or even continents!

Traditional method of displaying taxidermy

Booth’s idea for his museum necessitated a different way of displaying his collection. His plan was to exhibit an example of every bird found in Britain (native or migratory), in every stage of plumage and placed within the habitat it was observed in.

He started this process by sketching and painting the birds in the field while on shooting trips. These field drawings included both landscapes of the birds in their natural surroundings, as well as studies of the vegetation and details of the birds themselves. The museum still houses several examples of these pictures, and though they are by no means masterpieces, they are an invaluable artefact of the creation of museum.

Puffin painting from E.T. Booth’s field observations

On Booth’s return home, his team of taxidermists and model makers set about recreating the birds and their environment to match as closely as possible the conditions he had observed his specimens in. This necessitated some unique techniques in order to recreate the natural environments. Grass was baked in sand ovens to fix the chlorophyll into the fronds, preventing them from quickly fading to brown. Leaves were contracted out to the milliners neighbouring the taxidermists (which just happened to be the business run by the taxidermists wife and daughters). These leaves were made from fabric and wire, and painted to look natural. Finally, the landscape was recreated by building papier mache landscapes, and using materials such as wax to create snow effects.

The resulting cases were fantastically lifelike, and were valuable in showing an audience without television, photography and easy travel, how these birds looked in life and the diverse environments they inhabit on our relatively small island.

These cases were accurate enough that when it came to illustrating Booth’s books about his expeditions, the artist Edward Neale was able to use the cases as models for his paintings.

This way of displaying animals in their natural environments would come to be known as dioramas, and were further improved upon by others, most notably places such as the New York Natural History Museum, where the scenes were further enhanced with background paintings.

Image: “Amnh fg04” by Fritz Geller-Grimm – Own work. Licensed under CC BY-SA 2.5 via commons.wikimedia.org/

Lee Ismail, Curator of Natural Sciences

xkcd Survey

2015-11-02T12:23:51Z

Why I’m #OfTheGovernment

2015-11-02T12:23:51Z

Article note: Why we work.

“So this is our phoenix moment. GDS doesn’t just need to sit inside one building. We have the responsibility to work not on the Government, but of the Government.” – Jason Caplin, Digital Director of UK Trade and Investment (UKTI) [Saturday 15 August 2015]

I joined the Government Digital Service (GDS) on Tuesday 18 September 2012, a date I know off by heart. Back then there were a couple hundred of us.

We were preparing to switch off DirectGov and Business Link. In other words make GOV.UK live.

It was a frenetic time. People were busy, stressed and loving it.

The only other work experience I’ve had that comes close was at Lehman Brothers, a now defunct investment firm. I did trading floor technical support in 4 different countries for them back in 1997.

In government I know I’m making my country a little bit better everyday.

I never felt that way in Lehman Brothers.

This is why I’m #OfTheGovernment – because I know I make a difference.

I left GDS in January 2015 to work in the Cabinet Office Transparency and Open Data team.

But I’m still a GDS’er – that spirit will live in me forever.

User research, user needs, agile, sprints – all this I learnt at GDS.

In Jason’s blog post he askes us to:

make a commitment to remember why we got into this in the first place
announce when we, as a government revolutionaries, are ready to move on to out next in-government contract

I went to work for GDS because I:

saw alpha.gov.uk and thought, “wow” – I remember that moment with crystal clear clarity
was frustrated with Birmingham City Council’s (BCC) internal and external digital services
wanted to learn from GDS and return to BCC to digitally detonate it

I’ll make good on #3 one day, but not yet. There are still many roles I need to learn.

Then I will move back to Birmingham and blow it up.

Jason – thank you for reminding me why I got into this

World Wide Web Creator Tim Berners-Lee Leads W3C to Establish Online Payment Standards Including Bitcoin

2015-11-02T12:23:51Z

The World Wide Web Consortium (W3C) started review of a draft Web Payments Working Group Charter. The Web Payments Working Group will launch by the end of September after the end of the review on September 15, start working on an overall Web payments architecture, and prepare key topics for discussion at the next Technical Plenary/Advisory Committee meeting (TPAC 2015) in October.

The W3C, led by World Wide Web inventor Tim Berners-Lee, is an international body that develops open standards to ensure the long-term growth of the Web. The Web Payments Interest Group acts as the overall coordinator at W3C of a vision for Web Payments.

“The Web Payments Working Group is not creating any new digital payment schemes, but rather integrating existing and emerging schemes more efficiently and securely into Web applications,” states the W3C announcement. “A standardized message flow should make it easier to automate payments, which will improve the overall security and user experience of making payments on the Web.”

The Web Payments Interest Group recently updated its Web Payments Use Cases 1.0 working draft. The Group also published a FAQ with more information about the anticipated benefits of the future standards, a diagram illustrating the high-level message flow, and some examples of different Web payment approaches.

The W3C Web Payments documentation makes only sparse references to bitcoin and cryptocurrencies, which are only mentioned as possible options alongside other online payment means such as Google Wallet, Apple Pay, PayPal and iDEAL, a payment method that enables consumers to pay online through their own banks. The Use Cases draft includes a short section dedicated to cryptocurrency payments with bitcoin and ripple, with a scenario that outlines an ideal payment experience using bitcoin, or a bitcoin-like cryptocurrency.

Internet pioneers such as Ted Nelson, Marc Andreessen and Berners-Lee himself thought that the Internet should have a built-in framework for micropayments. Berners-Lee tried to include micropayments in Web protocols, but the idea hasn’t been implemented so far.

“In the late 1990s Berners-Lee tried to develop a micropayments system for the Web through the World Wide Web Consortium (W3C),” reported Walter Isaacson in his 2014 book “The Innovators: How a Group of Inventors, Hackers, Geniuses, and Geeks Created the Digital Revolution.” The idea was to devise a way to embed in a Web page the information needed to handle a small payment, which would allow different electronic wallet services to be created by banks or entrepreneurs. “It was never implemented, partly because of the changing complexity of banking regulations,” noted Isaacson.

The preparatory work of the Web Payments Interest Group and the forthcoming work of the Web Payments Working Group can be seen as gradual steps to implement Berners-Lee’s vision. However, it’s surprising that the official W3C documents produced to date make only incidental mentions of bitcoin, which is the only form of Internet money and “Internet native” payment system that exists, works, effectively implements one-click Internet payments, and is rapidly gaining recognition and partial acceptance from the financial system.

Isaacson reports that Andreessen mentioned bitcoin as a good model for standard Internet payment systems. “If I had a time machine and could go back to 1993, one thing I’d do for sure would be to build in bitcoin or some similar form of cryptocurrency,” Andreessen said.

A possible explanation for the more timid approach of the W3C is that the organization prefers to distance itself from the more controversial aspects of bitcoin, including the possibility of private and semi-anonymous transactions, and wait for “sanitized” versions of bitcoin.

Photo Southbank Centre / Flickr (CC)

The post World Wide Web Creator Tim Berners-Lee Leads W3C to Establish Online Payment Standards Including Bitcoin appeared first on Bitcoin Magazine.

The replicated distributed shared public ledger formerly known as the blockchain

2015-11-02T12:23:51Z

I had a lot of fun at the FinTech Storm event in London last week. Having been dragooned into being the Q&A ringmaster by the very persuasive Arifa Khan @misskhan), I found myself really enjoying the range and depth of questions coming from the audience. And I had a fantastic panel to work with, with Safello, Coin Sciences, Barclays, Everledger and Coinsilium joining in an open and entertaining (and informative) debate.

I was particularly interested in Gideon Greenspan’s (Coin Sciences) presentation of private blockchains, a subject dear to the heart of many of our clients and the focus gof a great deal of activity at present. The well-known venture capitalist Fred Wilson wrote about this recently, noting that financial institutions might be early adopters of private versions of blockchains for specific, industry-wide applications. As he notes, financial institutions may not be entirely comfortable with the blockchain as it is now.

One concern I hear, though, is that banks like to know who is managing their infrastructure and they are uncomfortable with miners they don’t know, located in parts of the world that make them nervous, providing the transaction processing infrastructure for these applications being built on the blockchain. To me, that is the perfect reason for banks and brokerage firms to take a bit of their data processing infrastructure and point it to the blockchain and start mining it. They could even create a mining pool among the large money center banks. And it is relatively simple for a blockchain application to route its transactions to certain miners to process.

[From Banks and Brokerages Should Be Mining The Blockchain – AVC]

Why would they create such a pool? It would not be to profit from the mining process, a process that (as Gideon pointed out) is enormously expensive and hugely inefficient, because it was created to deliver a specific kind of robustness and censorship-resistance in order to deliver a form of digital cash substitute. But, as he said, some people want to use the blockchain as a tool, not as an ideology.

If you think of the blockchain as an open source, peer to peer, massively distributed database, then it makes sense for the transaction processing infrastructure for it to evolve from individuals to large global corporations. Some of these miners will be dedicated for profit miners and some of them will be corporations who are mining to insure the integrity of the network and the systems they rely on that are running on it. Banks and brokerage firms are the obvious first movers in the second category.

[From Banks and Brokerages Should Be Mining The Blockchain – AVC]

I don’t think this is necessarily the way forward though. It seems to me that “mining” presupposes a particular blockchain architecture. That architecture has been developed, as noted, to deliver a modus vivendi unrelated to the world of financial services, where banks are supposed to trust each other and to know their customers (and their customers’ customers). Financial services do not want, or need, any such thing. This is why it is not at all surprising to see this kind of proposition emerging.

ItBit has revealed new details about its formerly top-secret Bankchain project, a private consensus-based ledger system aimed at appealing to enterprise financial institutions […] without using bitcoin or its blockchain.

[From ItBit Reveals Bankchain Project Won’t Use Bitcoin]

The chap from ItBit who is being interviewed in this article goes on to say that their architecture is “inspired by” the blockchain even it is not actually the blockchain (or, for that matter, a blockchain at all). I love this, and I expect to see more of it in the near future, because there must be a lot of people who think that a replicated, distributed shared ledger is an excellent architectural concept but they don’t want to use a cryptocurrency and nor do they want to use a proof-of-work protocol to defend against subversion by unknown actors since all of their actors are already known and trusted. In fact, I think it may be possible to be argue that most financial institutions, even if they don’t realise it right now, will want to use a different kind of ledger. Blythe Masters of Digital Asset Holdings, who really does understand financial markets in a way that I really do not (she was rather impressively called “the woman who invented financial weapons of mass destruction” by The Guardian) said when speaking at the recent American Banker conference on “Digital Currencies and the Blockchain” that “It’s important to be aware as you think about this that there is more than one distributed ledger technology, not all of them share the same strengths and weaknesses and furthermore, that the thinking in this space is evolving very rapidly” (my emphasis). Absolutely.

In her book “Blockchain“, Melanie Swan points in the same direction. She says that even if all of the infrastructure developed by the Bitcoin blockchain industry were to disappear then its legacy could persist. The blockchain has provided new larger-scale ideas about how to do things. She goes on to say that even if you don’t buy into the future of Bitcoin as a stable long-term crypto-currency, or blockchain technology as it currently is conceived, there is a very strong case for decentralised models. I strongly agree with her view here that “decentralisation is an idea whose time is come” and her characterisation of the Internet as a new cultural technology that opens up techniques such as distributed public ledgers that could allow more complicated coordination across society than those through centralised models. Whether this will, as she says “speed our progress toward becoming a truly advanced society” I cannot say (although I have my doubts!).

So why, I can hear you asking, bother with the replicated shared public ledger formerly known as the blockchain at all if financial institutions already have databases and such like? I think you can see three broad lines of reasoning that add up.

The first is robustness. If some or all of the participants in some marketplace each has an instance of the complete ledger, then the system as a whole might be expected to be more resistant to individual failures, errors and attacks. Think about the recent ATM and debit card system crashes that plagued one of the UK banks.

The second is innovation. When innovative and imaginative people have access to ledgers built from post-1960s components (e.g., APIs and XML), then they will no longer create accounting packages (and laws) that use the virtual world to simulate paper. They will use shared ledger technology to create a new kind of accounting not to do conventional account quicker.

Common sense dictates specialized distributed ledgers will better address specific assets via specialized algorithms and specialized scripting frameworks.

[From Distributed Ledgers Part III: Tokenization of Assets | FiniCulture]

The third is transparency. As I mentioned in the discussion about the “glass bank”, transparency may be the defining characteristic of the new financial order and I expect this to be a focus of our clients’ attention in the near future. I advance the theory here that the next generation of financial applications will focus on transparency as the key to the new way of doing things: the robustness and the innovation are great, but it is in area of transparency that new cryptographic techniques make it possible to create a new kind of ledger. I’ll write more about this in the future, but I will exploring the idea that transparency may be the lasting legacy of the financial crisis in my keynote at Next Bank Barcelona on September 22nd.

You might add a fourth line of reasoning, which is to do with marketing, herd investors and fast-talking consultants, but we’ll put that to one side for the time being. So for now, let’s just focus on applications that can be “inspired by” the blockchain.

A Quantum Theory of Money and Value

2015-11-02T12:23:51Z

This is a guest post by David Orrell, a mathematician and author of books including Truth or Beauty: Science and the Quest for Order (Yale University Press). He is currently working on a book about money.

“I do not understand where the backing of bitcoin is coming from. There is no fundamental issue of capabilities of repaying it in anything which is universally acceptable, which is either intrinsic value of the currency or the credit or trust of the individual who is issuing the money, whether it’s a government or an individual.” — Alan Greenspan

Is bitcoin money? To most readers the answer will be a resounding yes, but to many people, including former Federal Reserve Chairman Alan Greenspan, the answer is less clear. Indeed, one of the things holding back the adoption of cybercurrencies such as bitcoin is that they do not conform with traditional ideas about money.

Bullionists, for example, argue that money needs to be backed by precious metal – and bitcoin is not. Chartalists (from the Latin charta for a record), on the other hand, assert that coins and other money objects are just tokens that the state agrees to accept as payment of things like taxes. Again, bitcoin fails. Most mainstream economists, meanwhile, would ascribe to the view that money has no unique or special qualities, but instead is defined by its roles, e.g. as a medium of exchange. But emerging cybercurrencies do not have much use as a medium of exchange – at least at first.

So how do they become money? The answer to this question is that money of any sort has quantum, dualistic properties – analogous to the wave/particle duality of quantum physics – which allow it to be booted up from the ether.

As an example of quantum money, consider a U.S. dollar bill. On the one hand, it is a physical object which can be owned, traded and valued. On the other hand, it represents the number one, which is why it says “1” or “one” in fifteen different places. And numbers and things are as different as waves and particles. Numbers live in the abstract, virtual world of mathematics, while things live in the real world. Numbers are exact, while qualities such as perceived value depend on the person and the context. Numbers are hard and fixed, like the particle aspect of matter. Concepts or judgments such as worth or value are fuzzy, like the wave aspect of matter. The tension between these contradictory aspects is what gives money its powerful and paradoxical qualities.

The trade of money objects for goods or labor in a market means that those things attain a numerical value as well, namely the price, by contagion, just as the atoms in iron spontaneously align in a magnetic field. Market prices are therefore an emergent property of the system, in the sense that they emerge from the use of money objects. Of course, a bitcoin transfer does not resemble the traditional, Newtonian idea of a self-contained object, but then neither does matter when viewed from a quantum perspective – the real and virtual become blurred.

Money objects are unique in that their value is designed to be objectively fixed and stable. For other goods, their values are indeterminate until the moment they are exchanged for money (just as, according to quantum mechanics, the position or momentum of a particle is fundamentally undetermined until it is measured, at which point it “chooses” a value). This special status makes money objects desirable in themselves.

Implicit to traditional theories is the idea that money has to be backed by some pre-existing quantity, be it real (e.g. metal) or virtual (e.g. the law of the state). It therefore passively inherits its value from outside. But from a quantum perspective, rather than money being backed by something of monetary value, it is the other way round – market prices emerge dynamically from the use of money. A cybercurrency is supported not by metal or the state, but by something much more distributed and amorphous – its network of users. A property of networks is that their power expands rapidly with size. The value of a cybercurrency therefore grows in the same way with the size of the network of users, so can initially be near-zero. It is not necessary to begin with an external debt or a source of value, because the two can expand together.

This process makes sense only when we see money as a quantum, dualistic phenomenon. Just as bitcoin is revolutionizing money, so we need to update theories of money that were shaped by previous monetary eras of gold standard or state fiat currencies.

Adapted from the full paper available at SSRN. See video presentation of related Marshall McLuhan lecture, hosted by transmediale and the Canadian Embassy in Berlin.

The post A Quantum Theory of Money and Value appeared first on Bitcoin Magazine.

The True Ancient Way of Zen

2015-11-02T12:23:51Z

Q. What is the true ancient way of Zen?

A. Bodhidharma said that it is nothing more than "seeing the self nature," chien hsing (kensho, in Japanese).

Q. That doesn't dispel the mystery for me. What is this self-nature Bodhidharma spoke of, and how do you see it?

A. When you see with your eyes, you are enlightened as to forms. When you see with your Buddha eye, you are enlightened as to the baseless and shining nature of all your experiencing. Many sutras have made statements about what this "baseless and shining nature" is or isn't, and Bodhidharma quoted some of these sutras, which say that it is the original Mind in all sentient beings. Where he departed from the sutras was in his insistence that you have to experience and realize it for yourself. That is, you have to wake up just as Shakyamuni woke up when he saw the morning star.

Q. How do I do this?

A. According to Bodhidharma, you've got to cut off thinking and abandon all fixation on forms. This brings the illusory world of samsara to a full stop. Your Mind wakes up and knows itself instantly as soon as you have accomplished this. After that you can't be imprisoned by karma anymore. Cause and effect can't touch you. You are like a dreamer who has woken up from a dream. This is the "entry by Dharma principle," which is sudden -- as opposed to the "entry by practices," which is gradual.

Q. But how? I mean, what's the method? Am I supposed to meditate with my legs crossed?

A. Bodhidharma taught "wall-gazing." You use the wall to cut off all your fixations on illusory phenomena. Other Zen Patriarchs like Daoxin taught a sitting meditation in which you turn your gaze inward onto itself and try to find the source of your awareness. Hui-Neng said that the best way to see the self-nature is to contemplate the Diamond Sutra. He said that if you hold the Diamond Sutra with all your energy, there will come a moment when thinking stops and the Dharma body becomes clear. After that, even if thoughts resume it is not a problem, because the thoughts will be pervaded by formless Prajna-wisdom.

Later Zen Masters like Pai-Chang and Huang-Po taught just stopping the arising of thoughts in all situations until you penetrate through to reality and your true mind, featureless like space, is wholly realized in all of your life and its tasks. During the subsequent Golden Age of Chan in the T'ang Dynasty, the Masters invented many energetic ways to try to stop their students' stupid, lazy compulsive thinking, including silence, shouting, hitting with a stick, uttering a meaningless phrase like "Sesame cake!" in response to questions about the Dharma, &c. Still later, the stories of the Masters' encounters with clueless students were collected into books that circulated throughout China. Some of these anecdotes, called "public cases," were collected into special handbooks that were used in training monks. Mumon Ekai and Dahui both insisted that the key to koan practice is focusing all of your Qi (bodily energy) on the koan, to hold it steadily in absolute concentration without trying to think or form any views about it.

So, if you happen to have weak, listless Qi and are incapable of sustaining one-pointed concentration for any length of time, then you had better find ways to strengthen your Qi and firm up your ability to focus your mind or you are out of luck with Zen. This perhaps explains why Masters in the Linji (Japanese, Rinzai) school mined Taoism for its wonderful store of Qi-strengthening techniques. In some places Zen students are still trained using koans, but koan training has become mechanical and nobody really believes it leads to "seeing the self-nature" anymore.

Zen is not a matter of sitting with your legs crossed, but nor is it a matter of furrowing your brow over koans from old Chinese books. The true ancient way of Zen is to wake up right now. Of course, it's always "right now" so you always have the opportunity to wake up, so long as you're alive.

Q. What's the best way to wake up right now?

A. That's what you've got to find out! Why not start here?

Bitcoin Considered a ‘Traditional Currency’ by Australian Senate Committee

2015-11-02T12:23:51Z

The inquiry of the Australian Senate committee may overrule the decision of the Australian Taxation Office (ATO), which classified bitcoin as an intangible/foreign asset that falls under the coverage of Goods and Services Tax.

The proposal submitted by the Australian government will have bitcoin considered as a traditional currency, and thus will nullify many of the regulations or legal “restrictions” set to be applied on bitcoin.

“The opportunities for trade, investment, high salaries and world-leading skills are far more important [than any potential loss of revenue], and I urge the states to work with the Commonwealth to make what amounts to simple change,” Labor Senator Sam Dastyari told the Australian Financial Review.

Dastyari said that such leniency on the currency will help many bitcoin- or other digital currency-based entrepreneurs and startups in the nation to continue their operations without any interruptions or restrictions.

“Without a doubt, the main benefit will be the confidence and certainty that removing a GST will provide to our own digital entrepreneurs, and the foreign businesses who want to set up here,” Dastyari added. “The Treasury ministers need to work with the states to make the changes necessary to bring our legislation into the 21st century.”

The proposal of the Australian Senate Committee will be taken up for vote this week, and will conclude the tax-free status of bitcoin in Australia once and for all.

The ruling from the Senate Economics References Committee into digital currency, predicted to be considered this week as well, will bring Australia in line with the United Kingdom in terms of its treatment on bitcoin.

The post Bitcoin Considered a ‘Traditional Currency’ by Australian Senate Committee appeared first on Bitcoin Magazine.

You can’t rob a glass bank, even if you work for it

2015-11-02T12:23:51Z

Article note: The future is publicly private.

At the Imperial College (packed) discussion on “Distributed Ledgers – Future Research Challenges“, chaired by Professor Bernard Silverman FRS, the Home Office Chief Scientific Adviser (and a mathematician), a series of speakers (including yours truly) sparked a valuable and fascinating series of discussions around the topic and, in my case at least, left me feeling as if I’d actually learned something.

In the morning, Iain Stewart from Imperial College introduced us to his “Nonsense Watch”. It turned out that his nonsense watch only had two things on it:

We hate Bitcoin but we love the blockchain.
The blockchain is efficient.

In a memorable presentation, elaborating on these topics, he told the assembled group that the a good way to think about the blockchain is to compare it to somebody swallowing condoms full of heroin and carrying them through customs in your stomach. It’s a really inefficient way to transport heroin around but you have to do it because “powerful forces” (as Iain called them) are trying to stop you from doing it!

I will never forget that example! Anyway, just to explain the background. Consult Hyperion were asked to become part of a consortium bidding to examine the potential for Bitcoin, the blockchain and suchlike across a variety of sectors in response to the Treasury’s decision to allocate £10m in funding for the topic. In this context I (along with a couple of my colleagues) took part in discussion at Imperial that brought together academics, technologists, government and a number of different businesses (including banks), which is why we were listening to Iain.

I thought it would be helpful, with such a mixed group, to use a narrative that would help people to communicate effectively and share ideas. This is why I used the “glass bank” example that I’ve used before and built on the presentation that I gave to the Dutch National Bitcoin Congress in June. As it turned out, it worked very well on the day and after discussing it with a couple of other people I’ve decided to expand it as clients might find it a helpful way to think about the new technology (as they get a bit bogged down in Bitcoin and cryptography). I have to say that it worked largely because Richard Brown from IBM had set things up so nicely for me with his discussion about “Creation Myths and Shared Ledgers” that immediately preceded my talk.

The actual purpose of my talk, narrative aside, was to put forward three solid ideas for research threads that could form part of the project. I’ll blog about this, but I was looking for examples of areas for genuine research, areas where the answers aren’t known, that could complement shared ledger technology in some way to deliver something special or different groundbreaking.

In the end the three examples I settled on were:

Homomorphic encryption. Although I wouldn’t say I was absolutely up to speed on the state-of-the-art in this field I do understand the rudiments and it strikes me as an area where any small improvements could lead to pretty significant benefits. This is an area where pure mathematics is needed and I would’ve thought that most businesses and even technology companies just do not have that kind of research going on.

Publicly-private records. This builds on the idea of “translucent” databases to use homomorphic encryption encryption to put data on public blockchains that can be audited in necessary ways but remain private. I don’t think it’s enough just to store encrypted data on public blockchains. If we can agree on the use of the word translucent to mean data that can be audited while remaining encrypted, then I genuinely do feel that a new kind of financial services industry could be on the horizon.

Bottom-up identity. It occurs to me that if it was possible to use homomorphic encryption to store publicly private records about an individual then the cryptographic techniques that are currently used to demonstrate attributes without revealing them (e.g., interval proofs) might be transformed to help creates a shared infrastructure for identity built on very different foundations (e.g., testing that an age is >18 without decrypting the age).

As I say, these are areas for research. I don’t know what might be discovered in these fields any more than anyone else does, but I have a feeling that it might be both important and of immediate practical application. Now imagine that we bring those technologies together to create “glass institutions” in the financial services world. This would be utterly transformational, in a way that making payments cheaper and quicker (even if this were true) is simply not.

The idea of glass institutions may seem paradoxical but with the advances in technology and our evolving understanding of how replicated shared ledgers might transform a variety of different kinds of systems, I think we can begin to explore their impact. I rather like the language of translucent transactions and I think it works well with the glass bank narrative to open up sensible discussions at the business (and regulatory) level.

So where does this take us? Well, as Richard said in his talk, a replicated shared ledger in financial services is unlikely to be “permissionless” in the censorship-resistant sense that Iain was talking about at the start of the day. However, it is entirely possible and highly desirable to construct replicated shared ledgers that allow for permission and innovation in the use of the ledger even if the ability to create transactions on the ledger is permissioned. Of course, this is not to say that both permissioned and permissionless ledgers cannot co-exist. Michael Mainelli provides an excellent narrative for this perspective, talking about the “Temple of Financial Services” in comparison to the “Souk of Sharing Economies”.

While my heart is with the Souk of Sharing Economies, my head recognises that there may be room for both. A sensible union would be a few, competing, ‘blockchain-type’ services encircling the globe providing end-of-day validation and recording of transactions, while thousands of mutual distributed ledgers do the busy work of serving thousands of shared economies. In effect, the merchants of the Souk bring their ledgers up to the Temple to be validated and timestamped by whichever priests occupy the Temple of Financial Services. It may not be orthodoxy, but it’s not heresy either.

[From iGTB – Liquidity Management – The Temple & The Souk – The Future Of Mutual Distributed Ledgers]

The permission, distributed shared ledger of the Temple will mean disruptive change. I can show this by giving a couple of obvious examples: what if a company chose from a group of regulator-certified auditing applications instead of from a competing group of auditors? Auditing banks’ books would become a continual process and you might even have multiple different applications constantly auditing the same bank on behalf of regulators, shareholders, customers, pressure groups and even rival banks. Anti-money-laundering processes would shift from expensive and rather useless gatekeeping combined with floods of suspicious transaction monitoring to being a variety of different anti-money-laundering applications combing through the shared ledger entries to find transactions indicative of misbehaviour (at which point, law enforcement agencies could apply for warranted access to the unencrypted ledger entry or relevant meta data).

This is why I don’t think it is an exaggeration to say that the shift to shared ledger technologies might be one of the most important innovations of our image of our age, and I will close by making another historical analogy to support that point.

In Victorian Britain, the collapse of railway companies led to a colossal crash in 1866. It was caused (and here’s a surprise) by the banking sector, but in that case it was because they had been lending money to railways companies who couldn’t pay it back rather than American homeowners who couldn’t pay it back. The British government then, as in 2008, had to respond. It suspended the Bank Act of 1844 to allow banks to pay out in paper money rather than gold, which kept them going, but they were not too big to fail and the famous Overend & Gurney went down. When it suspended payments after a run on 10th May 1866 (as frequently noted, the last run on a British bank until the Northern Rock debacle), it not only ruined its own shareholders but caused the collapse of about 200 other companies (including other banks). The directors were, incidentally, charged with fraud but got off as the judge said that they were merely idiots, not criminals.

The reason I choose this example is that railway companies then held the same commanding position in the economy as banks do today, so the impact on UK plc was substantial. Bear in mind that the first railway service in the world started running between Liverpool and Manchester in 1830 and less than two decades later (by 1849), the London & North Western railway was already the biggest company in the world. When the Directors of these gigantic enterprises went to see the Prime Minister in 1867 to ask for the nationalisation of the railway companies to stop them from collapsing (with dread consequences for the whole of the British economy) because they couldn’t pay back their loans or attract new capital, they didn’t get the Gordon Brown, investment bank advisers, suspension of competition law and the tea and sympathy of 2008. Disreali sent them packing as he didn’t see why the public should bail out badly run businesses, no matter how big they might be.

Needless to say, the economy didn’t collapse. As you may have noticed, we still have trains and tracks. A new railway industry was born from the ruins, the services kept running and the economy kept growing. And there was another impact. Andrew Odlyzko’s paper The collapse of railway mania, the development of capital markets, and Robert Lucas Nash, a forgotten pioneer of financial analysis argues that the introduction of basic corporate accounting standards following the collapse of the railway companies was a significant benefit to Britain and aided the development of Victorian capitalism.

So, with the well-worn maxim about not letting a good crisis go to waste in mind, I would like to advance this hypothesis: the long-term impact of the financial crash of 2008 will be a shift to the replicated shared ledger as the central organising principal for financial services. An entirely new way, as Richard Brown notes, of building financial institutions based on common ledgers and APIs.

Francis Keally’s vision will be realised and to the great benefit of society as a whole. After all, you can’t rob a glass bank, even if you work for it.

What is permissioned-on-permissionless?

2015-11-02T12:23:51Z

Article note: Anarchy vs legality.

As of this writing, more than half of all VC funding to date has gone into building permissioned systems on top of a permissionless network (Bitcoin). Permissioned-on-Permissionless (PoP) systems are an odd hydra, they have all of the costs of Sybil-protected permissionless systems (e.g., high marginal costs) without the benefits of actual permissioned systems (e.g., fast confirmations, low marginal costs, direct customer service).

Thus it is curious to hear some enthusiasts and VCs on social media and at conferences claim that the infrastructure for Bitcoin is being rolled out to enable permissionless activity when the actual facts on the ground show the opposite is occurring. To extract value, maintain regulatory compliance and obtain an return-on-investment, much of the investment activity effectively recreates many of the same permission-based intermediaries and custodians that currently exist, but instead of being owned by NYC and London entities, they are owned by funds based near Palo Alto.

For example, below are a few quotes over the past 18 months.

In a February 2014 interview with Stanford Insights magazine, Balaji Srinivasan, board partner at Andreessen Horowitz and CEO of 21inc, stated:

Thus, if the Internet enabled permissionless innovation, Bitcoin allows permissionless monetization.

In July 2015, Coinbase announced the winners of its hackathon called BitHack, noting:

The BitHack is important to us because it taps into a core benefit of Bitcoin: permissionless innovation.

Also in July 2015, Alex Fowler, head of business development at Blockstream, which raised $21 million last fall, explained:

At Blockstream, our focus is building and supporting core bitcoin infrastructure that remains permissionless and trustless with all of the security and privacy benefits that flow from that architecture.

Yet despite the ‘permissionless’ exposition, to be a customer of these companies, you need to ask their permission first and get through their KYC gates.

For instance, in Circle’s user agreement they note that:

Without limiting the foregoing, you may not use the Services if (i) you are a resident, national or agent of Cuba, North Korea, Sudan, Syria or any other country to which the United States embargoes goods (“Restricted Territories”), (ii) you are on the Table of Denial Orders, the Entity List, or the List of Specially Designated Nationals (“Restricted Persons”), or (iii) you intend to supply bitcoin or otherwise transact with any Restricted Territories or Restricted Persons.

Is there another way of looking at this phenomenon?

There have been a number of interesting posts in the past week that have helped to refine the terms and definitions of permissioned and permissionless:

Ending the bitcoin vs blockchain debate by Gideon Greenspan
Bitcoin and Blockchain: two revolutions for the price of one? by Richard Brown
Why Bitcoin and Blockchain Tech are Tied at the Hip by Ryan Shea

Rather than rehashing these conversations, let’s look at a way to define permissionless in the first place.

Permissionless blockchains

A couple weeks ago I gave a presentation at the BNY Mellon innovation center and created the mental model above to describe some attributes of a permissionless blockchain. It is largely based on the characteristics described in Consensus-as-a-service.

DMMS validators are described in the Blockstream white paper. In their words:

We observe that Bitcoin’s blockheaders can be regarded as an example of a dynamic-membership multi-party signature (or DMMS ), which we consider to be of independent interest as a new type of group signature. Bitcoin provides the first embodiment of such a signature, although this has not appeared in the literature until now. A DMMS is a digital signature formed by a set of signers which has no fixed size. Bitcoin’s blockheaders are DMMSes because their proof-of-work has the property that anyone can contribute with no enrolment process. Further, contribution is weighted by computational power rather than one threshold signature contribution per party, which allows anonymous membership without risk of a Sybil attack (when one party joins many times and has disproportionate input into the signature). For this reason, the DMMS has also been described as a solution to the Byzantine Generals Problem [AJK05]

In short, there is no gating or authorizing process to enroll for creating and submitting proofs-of-work: theoretically, validating Bitcoin transactions is permissionless. “Dynamic-membership” means there is no fixed list of signatories that can sign (i.e. anyone in theory can). “Multi-party” effectively means “many entities can take part” similar to secure multi-party computation.¹

Or in other permission-based terms: producing the correct proof of work, that meets the target guidelines, permits the miner (block maker) to have full authority to decide which transactions get confirmed. In other words, other than producing the proof-of-work, miners do not need any additional buy-in or vetting from any other parties to confirm transactions onto the blockchain. It also bears mentioning that the “signature” on a block is ultimately signed by one entity and does not, by itself, prove anything about how many people or organizations contributed to it.²

Another potential term for DMMS is what Ian Grigg called a Nakamoto signature.

Censorship-resistance, while not explicitly stated as such in the original 2008 white paper, was one of the original design goals of Bitcoin and is further discussed in Brown’s post above as well as at length by Robert Sams.

The last bucket, suitable for on-chain assets, is important to recognize because those virtual bearer assets (tokens) are endogenous to the network. DMMS validators have the native ability to control them without some knob flipping by any sort of outside entity. In contrast, off-chain assets are not controllable by DMMS validators because they reside exogenous to the network. Whether or not existing legal systems (will) recognize DMMS validators as lawful entities is beyond the scope of this post.

Permissionless investments

What are some current examples of permissionless-related investments?

Source: Twitter

This past week I was in India working with a few instructors at Blockchain University including Ryan Charles. Ryan is currently working on a new project, a decentralized version of reddit that will utilize bitcoin.

In point of fact, despite the interesting feedback on the tweet, OB1 itself, the new entity that was formed after raising $1 million to build out the Open Bazaar platform, is permission-based.

How is it permission-based when the DMMS validators are still permissionless? Because OB1 has noted it will remove illicit content on-demand from regulators.

In an interview with CoinDesk, Union Square Venture managing partner, Brad Burnham stated that:

Burnham acknowledged that the protocol could be used by dark market operators, but stressed the OpenBazaar developers have no interest in supporting such use cases. “They certainly won’t be in the business of providing enhanced services to marketplaces that are selling illegal goods,” he noted.

Based on a follow-up interview with Fortune, Brian Hoffman, founder of OB1 was less specific and a bit hand-wavy on this point, perhaps we will not know until November when they officially launch (note: Tor support seems to have disappeared from Open Bazaar).

One segment of permissionless applications which have some traction but have not had much (if any) direct VC funding include some on-chain/off-chain casinos (dice and gambling games) and dark net markets (e.g., Silk Road, Agora). Analysis of this, more illicit segment will be the topic of a future post.

What are some other VC-funded startups that raised at least a Series A in funding, that could potentially be called permissionless? Based on the list maintained by Coindesk, it appears just one is — Blockchain.info ($30.5 million).

Why isn’t Coinbase, Xapo or Circle? These will be discussed below at length.

What about mining/hashing, aren’t these permissionless activities at their core?

Certain VC funded mining/hashing companies no longer offer direct retail sales to hobbyists, this includes BitFury and KnC Miner. These two, known entities, through a variety of methods, have filed information about their operations with a variety of regulators.³ To-date BitFury has raised $60 million and it runs its own pool which accounts for about 16% of the network hashrate. Similarly, KnC has raised $29 million from VCs and also runs its own pool, currently accounting for about 6% of the network hashrate.

What about other pools/block makers? It appears that in practice, some require know-your-customer (KYC), know-your-business (KYB), know-your-miner (KYM) and others do not (e.g., selling custom-made hardware anonymously can be tricky).

MegaBigPower gathers KYC information.
Spondoolies Tech is currently sold out of their hardware but require some kind of customer information to fill out shipping address and customs details. They have raised $10.5 million in VC funding.
GHash allows you to set up a pseudonymous account with throwaway email addresses (or via Facebook and Google+), but they have not published if they raised any outside funding
Most Chinese hashing and mining pools are privately financed. For instance, Bitmain has not needed to raise funding from VCs (yet). The also, currently, do not perform KYC on their users. I spoke with several mining professionals in China and they explained that none of the big pools (Antpool, F2pool, ~~BTC China pool~~, BW.com) require KYM at this time. Over the past four days, these pools accounted for: 21%, 17%, 10% and 8% of the network hashrate respectively — or 56% altogether. Update 7/29/2015: a representative at BTC China explained that: “Yes, we do KYC the members of our mining pool. We verify them the same way we KYC all registered users on BTCC.”
21inc, not much more is known publicly at this time but if the idea of a “BitSplit” chip is correct, then what could happen is the following: as more chips are flipped on in devices, the higher the difficulty level rises (in direct proportion to the hashrate added). As a result, the amount of satoshi per hash declines over time in these devices. What this likely will lead to is a scenario in which the amount of satoshi mined by a consumer device will be less than “dust limit” which means a user will likely be unable to move the bitcoins off of the pool without obtaining larger amounts of bitcoin first (in order to pay the transaction fee). Consequently this could mean the users will need to rely on the services provided by the pool, which could mean that the pool will need to become compliant with KYC/AML regulations. All of this speculation at this time and is subject to changes. They have received $121 million in VC funding.
As explained above, while individual buyers of hashing equipment, Bob and Alice, do typically have to “doxx” themselves up to some level, both Bob and Alice can resell the hardware on the second-hand market without any documentation. Thus, some buyers wanting to pay a premium for hashing hardware can do so relatively anonymously through middlemen.⁴ This is similar to the “second-hand” market for bitcoins too: bitcoins acquired via KYC’ed gateways end up on LocalBitcoins.com and sold at a premium to those wanting to buy anonymously.

Notice a pattern? There is a direct correlation between permissionless platforms and KYC/AML compliance (i.e., regulated financial service businesses using cryptocurrencies are permissioned-on-permissionless by definition).

Blockchain.info attempts to skirt the issue by marketing themselves as a software platform and for the fact that they do not directly control or hold private keys.⁵

This harkens back to what Robert Sams pointed out several months ago, that Bitcoin is a curious design indeed where in practice many participants on the network are now known, gated and authenticated except the transaction validators.

What about permissioned-on-permissionless efforts from Symbiont, Chain and NASDAQ? Sams also discussed this, noting that:

Now, I am sure that the advocates of putting property titles on the bitcoin blockchain will object at this point. They will say that through meta protocols and multi-key signatures, third party authentication of transaction parties can be built-in, and we can create a registered asset system on top of bitcoin. This is true. But what’s the point of doing it that way? In one fell swoop a setup like that completely nullifies the censorship resistance offered by the bitcoin protocol, which is the whole raison d’etre of proof-of-work in the first place! These designs create a centralised transaction censoring system that imports the enormous costs of a decentralised one built for censorship-resistance, the worst of both worlds.

If you are prepared to use trusted third parties for authentication of the counterparts to a transaction, I can see no compelling reason for not also requiring identity authentication of the transaction validators as well. By doing that, you can ditch the gross inefficiencies of proof-of-work and use a consensus algorithm of the one-node-one-vote variety instead that is not only thousands of times more efficient, but also places a governance structure over the validators that is far more resistant to attackers than proof-of-work can ever be.

This phenomenon is something I originally dubbed “permissioned permissionlessness” for lack of a better term, but currently think permissioned-on-permissionless is more straightforward and less confusing.

What does this mean?

Permissioned-on-Permissionless

The Venn diagram above is another mental model I used at the BNY Mellon event.

As mentioned 3 months ago, in practice most block makers (DMMS validators) are actually known in the real world.

While the gating process to become a validator is still relatively permissionless (in the sense that no single entity authorizes whether or not someone can or cannot create proofs-of-work), the fact that they are self-identifying is a bit ironic considering the motivations for building this network in the first place: creating an ecosystem in which pseudonymous and anonymous interactions can take place:

The first rule of cypherpunk club is, don’t tell anyone you’re a cypherpunk. The first rule of DMMS club is, don’t tell anyone you’re a DMMS.

The second bucket, neither censorship resistant nor trade finality, refers to the fact that large VC funded companies like Coinbase or Circle not only require identification of its user base but also be censor their customers for participating in trading activity that runs afoul of their terms o

The Sky

2015-11-02T12:23:51Z

Machine Supply

2015-11-02T12:23:51Z

I read a bunch of books -- here are the books I read in 2008 which was a particularly good year. Some books are comfort blankets (Red Mars, Kim Stanley Robinson), some are like the best hikes: a steady workout on the muscles accompanied by epiphany after epiphany after epiphany (Philosophy & Simulation, Manuel DeLanda). Ursula le Guin makes me forget where I am. Three Men in a Boat (Jerome K. Jerome) makes me laugh out loud, and was the first book recommended to me by Angela. We're now married. So.

Last week I was having a beer with Ben and Tom (literally everyone in this industry is called Ben or Tom or Matt), swapping sci-fi recommendations. It wasn't for finding new books, or at least not exclusively -- knowing what books someone loves is to know a person. I read 104 books in 2008, that was tough going. In the maybe 70 reading years I have available - mod a life-extending singularity cascading its way into reality - I could read a maximum 7,280 books. At all, ever. There are 6,000 books published every day. Knowing what books someone loves is to know their perspective and their journey, to have something special in common, to share a language.

I heard once that geeks come in two flavours: those who read A Thousand Plateaus; those who read Godel, Escher, Bach.

I'm ATP through and through. It changed my life. Here's chapter 1 as a PDF, I used to keep it printed by the door to give out to Jehovah's Witnesses. It's a philosophy roller coaster, a call to arms. Didn't get on with GEB.

I'm Starship Troopers not Dune, The Beatles not the Stones.

Recommendations

Anyway, I like to collect book recommendations. Sometimes I even read the books. At conferences, for years, I've asked people for their 3 recommendations.

Not favourites. Not the books they think I ought to read. Just 3 recommendations, whatever's on their mind. I try to find a board and some post-its and get people to share. Here are some recommendations from Design Engaged in 2004 where I met so many friends for the first time. Here's Matt Jones' version of the same question from Foo in 2014 -- I wasn't there, but touchingly the board is titled "The Matt Webb question: What 3 books should I read this year?" Thank you! I'll be at Foo in a couple of weeks, let's do the same session.

I love to share my recommendations with other people. Here are the books I read in April and May 2015.

So I made a website.

Machine Supply

At Machine Supply I can make a book recommendation by pasting in an Amazon link and writing a short paragraph. Then when I share a link to that (on my blog or on Twitter), my reason comes joined together with two Amazon links... one to the US site and one to the UK site. That's always been a niggle for me, to bundle those things together, to make a recommendation which is easy to share.

I'm classing this as a hobby, which means I'm trying to make the kind of website that I'd use. I'm not a hugely early adopter generally. I don't spend much time kicking the tyres of online services, I need encouragement to keep using things because I'm enormously forgetful, and I'm hugely sceptical about putting words I write into other people's databases rather than plain text on my own laptop.

All of which means -- that's what I'm making. A website to make it easy for me to share book recommendations. Here's my recommendation for The Peripheral (William Gibson), and here it is again as it appears on Twitter.

What was amazing -- and honestly what I hoped would happen, and what I'll make sure the site encourages to happen, but didn't know whether it would happen or not - what was amazing is that a few friends tried out Machine Supply when I tweeted about it yesterday.

And already I've seen @blech recommended Spacesuit: Fashioning Apollo. (Now bought on Amazon.) And @chrbutler recommended The Book of Strange New Things - which I also love - and by the way mentioned four other books, one of which is a deeply loved favourite of mine, and the other three I hadn't heard of. So those are now on my books-to-check-out list.

What next?

As it says on the front page, Current status: Pre-pre-alpha, hobby. Links will break. Cities will fall.

I've got a hobby! Haven't had one of those in a while.

Have a play. Let me know if anything breaks. My aim is to make a handy, finely-tuned little crystal. Any and all ideas welcome.

Machine Supply is over here.

Why, oh why, do so many librarians continue to chain themselves to the past??

2015-11-02T12:23:51Z

Article note: wonder how much libraries are influencing my current thoughts on open data...

Ask yourself a question: Do you believe that the only way we in libraries convey and create knowledge is through reading? Via books? By the written word?? Do you have any doubt that when most people think of books, the term “library” is somewhere nearby in their thoughts?

I doubt you answered any of the above with a “yes”. (If you did, please contact me separately because we really need to talk!)

So if you don’t think that way, why, OH WHY do we continue to allow our libraries, our services, our very cause for existence, to be repeatedly tied to the idea that reading is the sole purpose of libraries?!?!?! Why do we so blatantly reinforce that image?

Now, let me state the obvious here. There is no question that for a very long time books have been and they will continue to be in the future, a major vehicle for the transmission of knowledge, whether it’s fact or of your favorite author’s latest new work of fiction. However, in all these cases can we agree that the goal is the creation of new knowledge?

David Lankes reminds us in “The Atlas of New Librarianship” that: “The mission of librarians is to improve society through facilitating knowledge creation in their communities.”

Our mission - knowledge creation. I agree with that statement. (If you’re wondering what I’m defining as knowledge, refer to this article, Section 6.)

But let’s remember all the additional forms which knowledge exists in, is created, curated and transmitted in today’s world: Video, photography, sound, software, data sets, webcasts, geo-location files, collaborative rooms, our communities of users/members and yes, librarians!

Why is this so hard for us to take in and act upon? You say it’s not? Well then, please consider the following:

Library Promotion. It’s summertime, so look to your nearby public library promotions. I’m just guessing that the featured event is summer reading. Ok, I can even agree with this, but where are the programs for using a camera to tell a story, to learn about visual reality as a pathway to have a debate with Plato, to work in collaboration with other children to achieve a knowledge goal, the list goes on and on. Yet our focus is where? Books….

Face to the World - Physical. Here’s a photograph of the outside of the parking garage of a Midwestern public library. I’d say that’s a pretty clear statement of what they think they’re about and it does a great job of reinforcing that the library is all about….. books.

Face to the World - Virtual. Take a look at most any library’s website, discovery system or OPAC and apply a really critical eye to it. (Better yet, get one of your users to sit down beside you so you can see it through their eyes.) Ask them: What does it say to you about how your library provides access to existing knowledge? In what forms or media types? I suggest you take a look at Harvard Library’s interface as an example of how to do it well; it features a listing in the left column of “books, all databases, article/journals, news, audio/video, images, archives/manuscripts, dissertations and data. Nice.

Knowledge Creation Tools. What tools does that site provide you to assist you in creating new knowledge? Do you feel that you can create new knowledge remotely or must you go to the library to do it? Can you use any device you want in accessing/creating knowledge? Can you do it from any location you want? The answers to those questions will tell you a great deal.

Signage/Services. One of my pet peeves at most libraries is services with names like “reading lists”. REALLY? Have you seen a professor who only uses reading to instruct, to teach, to engage students? Most use lectures (now frequently recorded and online), PowerPoints, webcasts, podcasts, digital content, labs where students must collaborate, writing assignments and oh yes, some articles and books. But how many other sensory input/stimuli did they also use? Did we not assist in providing access to all of those? So, WHY do we only talk about the “read” portion?!?!?!? At least, let’s agree to change “reading lists” to “resource lists” and anything else that is so named as well.

As librarians we need to move away from branding that ties libraries solely to printed materials. We are not just about books or journals, we’re about knowledge and the containers that knowledge comes in are far great than just the printed forms.

Please, unchain your library from the past.

Austerity: The LARP

2015-11-02T12:23:51Z

Everyone in Britain is playing a game called Austerity. Some are playing the game with enthusiasm and conviction. Some are playing with calculation and cunning. And others believe they are not playing, when in fact they cannot escape the game.

Austerity is not a console game with expensive graphics, nor is it an addictive casual game for smartphones. It is a LARP: a Live Action Role-Playing game. Like other LARPs, this game consumes your environment and your life. Unlike other LARPs, Austerity does not take place on a disused Swedish naval destroyer and end after a weekend. You will live and breathe Austerity for as long as everyone continues to believe in it, which means it may have no end.

It has a beginning, though: the Second World War.

Nostalgia is an intoxicating brew. We venerate WW2, the last time Britain was Great, the last time the Kingdom felt truly United, the last time we had a national victory that wasn’t on the field of play. It’s natural to look back fondly on such times, acknowledging the horrors and respecting the sacrifice.

Wait, no. Not respecting the sacrifice – fetishising it.

This is Keep Calm and Carry On. This is Dig for Victory, ration books, Downton Abbey (sort of) and Doctor Who’s innumerable wartime stories.

Dig for Victory and ration books are real, of course. They were part of the civilian mission to harness the entire capacity of a country in the pursuit of victory in a total war. Likewise, war bonds and volunteering and sewing clothes for the men. Money was tight but it was necessary to be thrifty. Virtuous, even. And who can say that the war was not won by such virtuous sacrifice?

Austerity has those sentiments at its heart: sacrifice is necessary for victory against an existential threat such as the Nazis.

Today’s existential threats are the European Union, immigrants, a slightly high debt-to-GDP ratio, and a lack of respect from other countries. To prevail against such enemies, hard choices must be made. We cannot afford to waste money on shirkers, or waste money on fripperies such as arts and culture. We must cut taxes on entrepreneurs and reward hard-working families, because people who are not in families, and people who do not work hard, do not deserve anything.

Now, it may be that these hard choices often end up benefitting those who already have lots of money; but this is where the game becomes important as a justification and a distraction. If players are encouraged to emulate the heroes of WW2, to Keep Calm and Carry On, then we will be prepared to sacrifice anything to save the nation from existential threats: to cut social security, to close those theatres and museums.

Sometimes players get upset when they perceive that other players are breaking the immersion, as can happen in other LARPs. For example, we didn’t have all these foreigners back in WW2, so it’s wrong to have them here now. We didn’t have wind power and solar power either, so that must also be wrong.

But the truth is, we are all breaking the rules in Austerity. If we were really committing to the LARP, then we would be investing hours a day into community gardens and volunteer work. We would be living and fighting and dying, cheek by jowl, on the front lines, the baker next to the banker, the lawyer next to the labourer.

Real believers in Austerity would reinstate the two thousand British Restaurants, communal kitchens that would sell you a healthy meal for the equivalent of £1 in today’s money. They would serve a million meals a day to those who couldn’t afford any better, and they would make the country fit and strong.

Like other LARPs, Austerity is a sham. And like other LARPs, a lot of players don’t want to take on the hard roles – they just want to do the easy fun stuff; the sewing and dressing up and saving pennies while forcing other players to part with pounds. That is why the special mission in Austerity, “The Big Society”, was such a failure.

The real danger of the Austerity LARP, though, is that it’s not actually real. We don’t live in 1945 any more; we live in 2015. We do not face an existential threat to the nation (other than perhaps climate change). We are not obliged to spend £45 billion, or 2.2% of GDP, on a non-productive military. We do, however, have the money to spend more on the institutions that made this country great: social security, NHS, the universities, the schools.

We need to snap the fuck out this playtime and get real.

More on conversational UIs

2015-11-02T12:23:51Z

ICYMI, last week I dropped a ton of links + speculation on text messaging as user interface... Read it here. Alternatively catch up with:

Futures of text by Jonathan Libov of Union Square Ventures is a far, far better article than the one I wrote: A survey of all the current innovation in text as a medium. Plus: animated GIFs
Wired: The future of UI design? Old-school text messages is a quicker, more readable overview, and some neat extra points... It may always feel silly to talk out loud to Apple's virtual assistant; maybe Apple should let us text Siri instead.

I wanted to add a few more links.

Lark is a weight-loss coach that communicates with you exclusively through messaging.

Hello Lamp Post (detailed project page) is a playful SMS platform, inviting people to strike up conversations with familiar street furniture using the text message function of their mobile phones. Including escalating intimacy:

To help players feel as though their relationship with objects could develop, we built in a friendship mechanic - initial conversations would be a bit small-talky, about the weather and observations on the local environment, but on repeat visits the questioning of the objects would change, to focus on opinions, memories and beliefs.

(Unique qualities of text-based conversational UI... user-initiated conversations and app-initiation conversations feel the same, unlike regular apps; the element of time allows pauses and rhythms, like free-to-play games; it's how we already talk with our friends.)

Designing for text-based interfaces is going to take some experimentation.

What is conversation? is some decent theory... might be useful as a framework to talk about how conversations are structured and what's they're for. (Thanks @matt_thinkux.)

The word "just" creates a parent/child relationship. The article is in the context of women in the workplace, but this is an important point about language: Should a bot display deference? What should its stance be?

I'm definitely more into how all of this feels -- Alexis Lloyd (at the New York Times Research & Development group) wrote up her experiments: Our friends, the bots? I was curious to see what it would feel like to have a bot that was trying to engage as part of a social group

I haven't yet found the right words to characterize what this bot relationship feels like. It's non-threatening, but doesn't quite feel like a child or a pet. Yet it's clearly not a peer either. A charming alien, perhaps? The notable aspect is that it doesn't seem anthropomorphic or zoomorphic. It is very much a different kind of otherness, but one that has subjectivity and with which we can establish a relationship.

And:

The conversation about how to define the bot's relationship to us really elucidated the idea that we are moving toward one member called "non-human mental models". We are beginning to understand machine subjectivity in a way that is in keeping with its nature rather than forcing it into other constructs, like a person or an animal.

This I love.

It's not just bots. How do we speak with non-humans, on their own terms? What does a bot want? Or a penguin, or a rock, or the military-industrial complex. Do we need human translators who can hold empathy for them on our behalf? Do we need a speaker for the thermocline? See also: The Author of the Acacia Seeds, Ursula K. Le Guin.

There's a hashtag used by speakers for the bots: #botALLY.

What?

we are kind and gentle botmakers, allies to bots of all kinds and creeds

Found via that tag, a tool to help make Twitterbots: Cheap Bots, Done Quick!

e.g. @infinitedeserts, an infinity of deserts, each more infinite than the last.

(I'm no stranger to twitter bots, I made a presence machine and retold 99 Secrets -- both now silent.)

More on writing twitter bots, without code. More on writing twitter bots, with code.

Lastly:

Telegram Bot Platform. (Telegram is a messaging app with 60+ million monthly active users; it's growing fast.)

Bots are simply Telegram accounts operated by software - not people - and they'll often have AI features. They can do anything - teach, play, search, broadcast, remind, connect, integrate with other services, or even pass commands to the Internet of Things.

Neat about Telegram's approach, #1: Bots can now provide you with custom keyboards for specialized tasks (examples are shown). Any good bot platform is going to have to do this, typing is too cumbersome otherwise.

Neat about Telegram's approach, #2: any message from your bot forwarded to a person or group is a messaging equivalent of a retweet - bots are viral.

The really unique feature about conversational UIs is that messaging is social. Introductions can be made. Bots can take part in group conversations; facts can be remembered and shared. There's a figure and a ground.

Enough!

Political parties and organizational intelligence 2

2015-11-02T12:23:51Z

Article note: Interesting take on leadership, parties, and org intelligence.

#orgintelligence #politics @rafaelbehr contrasts the behaviour of the Conservative and Labour parties.

Before the 2015 election, the Labour party practised collective denial ("misplaced confidence", "kidded themselves"), believing that "organization could compensate for uninspiring leadership". Following the election, "a danger now is oversteering the other way".

Denial and oscillation are two of the principal symptoms I have identified of Organizational Stupidity (May 2010).

Contrast this with the Conservative willingness to invest in 'blue collar conservatism'. Behr attributes this initiative to George Osborne, one of whose political gifts "is the self-knowledge to identify gaps in his own experience and to plug them with astute appointments". Cameron, he suggests, is much less intellectually curious than Osborne. And yet it is Cameron who carries through Osborne's plan to appoint Robert Halfon in order to recalibrate the Conservative's relationship with the working classes.

What reveals itself here is a form of intelligence and leadership that is collective rather than individual, a form of collaboration and teamwork that has not been strongly evident in the Labour Party recently.

Steve Richards goes further ...

"During Cameron’s leadership the Conservatives have become more alive as a party, impressively animated by ideas and debate. Cameron appears to be an orthodox Tory but likes having daring thinkers around him, even if they do not last that long. ... In recent years Conservative party conferences have been far livelier than Labour ones, which have been deadened by fearful control freakery."

... and insists that "the next Labour leader must not be frightened by internal debate".

One of the essential duties of leadership in any organization must be to boost the collective intelligence of the organization. Not just debate, but debate linked with action.

Patrick Wintour reports that there was plenty of (apparently) healthy argument in Labour's inner circle.

"Meetings were quite discursive, because there were a large number of views in the room. ... [Miliband] enjoyed that. He used the disagreement as a means to get his own way. It is a very interesting case study in power, in that he would not be described typically as a strong leader, but very consensual. The caricature of him is as weak, but internally he had great control."

But that's not enough.

"The team that Miliband had assembled around him consisted of highly intelligent individuals, but the whole was less than the sum of its parts – it was, according to many of those advisers, like a court in which opposing voices cancelled one another out."

Furthermore, an important requirement for organizational intelligence is that it is just not enough to have an inner circle of bright and well-educated 'spads', and to appoint either the cleverest or the most photogenic of them as "leader". Perhaps the Labour inner circle deeply understood the political situation facing the party, but they neglected to communicate (forgot to mention) this insight to others. The vanguard is not the party. Any party that aspires to be a movement rather than a machine must distribute its intelligence to the grass roots, and thence to the population as a whole.

Exercise for the reader: count the ironies in the above paragraph.

Finally, intelligent organizations have a flexible approach to learning from the past. @freedland argues that Miliband was single-minded about the future, and refused to tackle the prevailing narrative about the Labour government's role in the 2008 economic crisis.

"The management gurus and political consultants may tell us always to face forward, never to look over our shoulder, to focus only on the future. But sometimes it cannot be done. In politics as in life, the past lingers."

Sources:

Rafael Behr, The age of machine politics is over. But still it thrives in the Labour party (Guardian 4 June 2015)

Jonathan Freedland, ‘Moving on’: the mantra that traps Labour in the past (Guardian 5 June 2015)

Tim Glencross, Attack of the clones: how spads took over British politics (Guardian 19 April 2015)

Brian Matthews, The Labour Party and the Need for Change: values, education and emotional literacy/intelligence (Forum, Volume 54 Number 1, 2012)

Steve Richards, Labour’s next leader should look to David Cameron, not Tony Blair (Guardian 1 June 2015)

Patrick Wintour, The undoing of Ed Miliband – and how Labour lost the election (Guardian 3 June 2015)

Chris York, The Rise Of The Spad: How Many Ministers Or Shadow Ministers Have Had Proper Jobs? (Huffington Post, 13 November 2013)

Related Posts:

Symptoms of Organizational Stupidity (May 2010)
Political Parties and Organizational Intelligence (May 2012)
Dark Politics (May 2015)

Updated 6 June 2015

Zen Mind Seeing Mind

2015-11-02T12:23:51Z

Article note: Good thoughts from @dgwbirch - when can I easily view my candidates plus their policies, online presence, history, and info about my ward etc.?

Q. What is Zen? Is it the nihilistic idea that there is nothing? Is that the"emptiness" I hear so much about?

A. The Nirvana Sutra says:

Emptiness means perceiving neither ‘empty’ nor ‘non-empty’. The natural radiance of emptiness can appear as anything at all. Since it is empty as it appears, appearance and emptiness are a unity. This can only be known by looking inwards. It is within the domain of your own self-knowing awareness-wisdom.

Zen is Bodhidharma's transmission of the Highest Truth (Tattva) outside teachings. Bodhidharma just pointed "inwards" to the treasure storehouse of bright, pure, stainless, timeless original self-knowing awareness-wisdom, aka your Mind.

There is no lineage outside of this Mind. There is no teaching or listening to teaching outside Mind either. What is Mind? It's the Buddha nature. Self-originating, self-enlightening, ultimately true and real. You can't grasp or conceptualize it; it can't be held, restrained, or put into a box. Even the Great Wall of China can't obstruct it. This Mind is not to be confused with the senses or with ideas. Yet it acts and perceives through the senses, and it is certainly the source of all ideas. "Outside of Mind there are no dharmas." Do not confuse this Mind with what it uses. Undoubtedly all that it ever uses is itself, but as soon as you conceptualize this or that function and reduce Mind to THAT, you are mistaken. Anything of which you can say "it is" is just Mind in its majestic, instantaneous functioning.

So how is it that this all-powerful Mind falls into ignorance and petty delusion, and comes to mistake itself for physical stuff? Mind itself never does; "ignorance and delusion" are names for a disease caused by enslavement to thinking, to conceptualizations that obscure it. Mind is just bright and knowing, and spontaneously acting out of its own infinite store of wisdom, in every situation.

The Sutra Requested by Kashyapa says:

Mind is not to be found within. Nor does it exist outside. And it can not be observed anywhere else.

The Sutra Requested by Maitreya says:

Mind has no shape, no color and no location. It is like space.

There is no need to train or do anything to this original Mind. What could you do to it? Only Mind is. All being is just this mind. As for physical stuff, it isn't apart from Mind, insofar it only appears in and to Mind; yet Mind is, in one sense, apart from it, transcendent to it, beyond it. Mind is "not this, not that," but rather the Way both this and that appear. As soon as you isolate some "thing" out of Mind's shockingly direct and original being, you are setting Mind against itself and getting confused. Such name-and-form thinking is the source of ignorant delusion. "All appearance is but a delusory image. Do not try to grasp or to follow such images. Try instead to see with the Buddha eye."

Q. What is Bodhidharma's "wall-gazing"?

A. It is just the direct experience of this mind. It is Mind seeing Mind without any conceptual problem. You can actually experience that your being is this mind, that all being is this Mind. It's bright and boundless. It's the blissful true reality that has never come or gone. You don't have to gaze at a wall. You can be aware of your pure awareness-wisdom in all situations, all the time.

Netflix Streaming - More Energy Efficient than Breathing

2015-11-02T12:23:51Z

Article note: OK, this is a great post. we need more energy efficiency geekfests like this to really open up conversations and expectations.

Netflix Streaming: Energy Consumption for 2014 was 0.0013 kWh per Streaming Hour Delivered

36% was from renewable sources

28% was offset with renewable energy credits

We plan to be fully offset by 2015, and to increase the contribution of renewable sources

Carbon footprint of about 300g of CO2 per customer represents about 0.007% of the typical US household footprint of 43,000 kg (48 tons) of CO2 per year

Since 2007 when Netflix launched its streaming service, usage has grown exponentially. Last quarter alone, our 60 million members collectively enjoyed 10 billion streaming hours worldwide.

Netflix streaming consumes energy in two main ways:

The majority of our technology is operated in the Amazon Web Services (AWS) cloud platform. AWS offers us unprecedented global scale, hosting tens of thousands of virtual instances and many petabytes of data across several cloud regions.
The audio-video media itself is delivered from “Open Connect” content servers, which are forward positioned close to, or inside of, ISP networks for efficient delivery.

In addition, energy is consumed by:

The ISP networks, which carry the data across “the last mile” from our content servers to our customers.
The “consumer premises equipment” (CPE) that includes cable or DSL modems, routers, WiFi access points, set-top boxes, and TVs, laptops, tablets, and phones.

First and foremost, we have focused on efficiency -- making sure that the technology we have built and use is as efficient as possible, which helps with all four components: those for which Netflix is responsible, and those associated with ISP operations and consumer choices. Then we have focused on procuring renewables or offsets for the power that our own systems consume.

AWS Footprint

Because Netflix relies more heavily on AWS regions that are powered primarily by renewable energy (including the carbon-neutral Oregon region), our energy mix is approximately 50% from renewable sources today. We mitigate all of the remaining carbon emissions, which added up to approximately 10,200 tons of CO2e in 2014, by investing in renewable energy credits (RECs) in the geographic areas that host our cloud footprint; last year, the majority went to RECs for wind projects in North America, with the remainder going to Guarantees of Origin (GOs) for hydropower in Europe.

Purchasing renewable energy credits (RECs) allows us to be carbon-neutral in the cloud, but our main strategy is to be more efficient and consume less energy in the first place. Back in the data center days, long provisioning cycles and spikes in customer demand required us to maintain large capacity buffers that went unused most of the time: overall server utilization percentage was in the single digits. Thanks to the elasticity of the cloud, we are able to instantaneously grow and shrink our capacity along with customer demand, generally keeping our server utilization above 50%. This brought significant benefits to our bottom line (moving to the cloud reduced our server-side costs per streaming hour by 85%), but also allowed us to drastically improve our carbon efficiency.

Open Connect Footprint

Open Connect, the Netflix Content Delivery Network, was designed with power efficiency in mind. Today, the entirety of Netflix’s Content Delivery servers consume 1.4 Megawatts of power. While these servers are located in hundreds of locations across the globe, a majority of them are in major colocation vendors with similar interest as ours in ensuring a bright future for renewable energy.

As we have evolved Open Connect, we have reduced the energy consumption of our servers significantly. At our 2012 launch, we consumed nearly .6 watts per Megabit per second (Mbps) of peak capacity. In 2015, our flash-based servers consume less than .006 watts per Mbps, a 100X improvement. Those flash-based servers generate nearly 70% of Netflix’s global traffic footprint.

When choosing where to locate Open Connect CDN servers, sustainability is a key metric used to evaluate our potential partners. It’s important that our data center providers commit to 100% green power through RECs and that they continue to find new and innovative ways to become carbon neutral. One such example is Equinix’s experiment with Bloom Energy fuel cells in its SV5 data center in San Jose, one of the facilities in which Netflix equipment is colocated. Equinix recently announced a major initiative to adopt 100% clean and renewable energy across their global platform. We have a goal to work with datacenter operators to increase their use of renewable sources of power, and we expect to buy offsets for 100% of any power that is not from renewable sources for 2015 and beyond.

We estimate that our Open Connect servers used non-renewable power responsible for about 7,500 Tons of CO2e in 2014.

ISPs

While we don’t control the energy choices of ISPs, we have engineered our Open Connect media servers to minimize the requirements for routers, by providing routing technology as part of the package, so that an ISP who chooses to interconnect directly with Netflix can usually use a smaller, cheaper, and much more power-efficient switch instead of a router for bringing Netflix traffic onto their networks. In some cases, avoiding the need for a router might eliminate three quarters of the power footprint of a particular deployment.

Consumer Premise Equipment

The energy footprint of the consumers’ home equipment (shared between various entertainment and computing uses in the consumers’ homes) dwarfs all the upstream elements by perhaps two orders of magnitude. Our focus here has been to provide streaming technology for Smart TVs, set-top boxes, game consoles, tablets, phones, computers that is as efficient as possible. For example, a big focus for the 2015 Smart TV platforms has been suspend and resume capabilities, which ensure that Netflix can be started quickly from a powered-down state, which helps TV manufacturers build energy-star compliant TVs that don’t waste energy while the user is not watching. This is one of several components in our “Netflix Recommended TV” program. Similarly, our choice of encoder technology takes into account the hardware acceleration capabilities of devices such as smart phones, tablets, and laptop graphics chips, which have the ability to reduce power consumption of video rendering, which might extend tablet battery life by 4x with matching reduction in total power consumption due to streaming activity.

A typical household watching Netflix might include 5W for the cable modem, 10W for the WiFi access point, and 100W for the Smart-TV. 115Wh of home power is responsible for about 70g CO2e for one hour of viewing.

We encourage our CE partners to make energy-wise designs, but ultimately the choices that customers make are also governed by their other home entertainment and computing needs and desires, and accordingly we don’t measure or attempt to offset those impacts.

Comparisons

In 2014, Netflix infrastructure generated only 0.5g of CO2e emissions for each hour of streaming. The average human breathing emits about 40g/hour, nearly 100x as much. Sitting still while watching Netflix probably saves more CO2 than Netflix burns.

The amount of carbon equivalent emitted in order to produce a single quarter-pound hamburger can power Netflix infrastructure to enable viewing by 10 member families for an entire year!

A viewer who turned off their TV to read books would consume about 24 books a year in equivalent time, for a carbon footprint around 65kg CO2e - over 200 times more than Netflix streaming servers, while the 100W reading light they might we use would match the consumption of the TV they could have watched instead!

Human communication strategies.

2015-11-02T12:23:51Z

Three distinct strategies; expressionism, literalism and impressionism. This stems from the fact that people are not symmetrical - different people interpret the same words differently. When people say "tell me the truth", they usually mean "use literalism", but in fact all three are simply different strategies to convey the same truth (or lie). Literalism is the strategy of using language that both profess to understand and for which an authoritative definition exists. Though arguably the most objective, it has many downfalls as a strategy; imprecision, easy to misinterpret or be misled and difficulty. Most useful for situations when the listener may reinterpret later (e.g. recorded message) or when there are multiple listeners. Expressionism is the easiest for the speaker - they simply allow their feelings to express themselves in the most direct and unfettered way possible. It puts a considerable responsibility on the listener to be able to correctly interpret them. This is often used as a sub-verbal communication mechanism between good friends and lovers. Impressionism, the easiest for the listener, is when they have to do no great work to interpret the meaning of the language used - it has already been designed explicitly for consumption of the listener by the speaker. It obviously requires the speaker to know exactly how the listener will interpret the words he says so that they will ultimately be left with the "correct" impression. Again, often used for communication between lovers, especially when one takes the lead to explain a difficult situation as they see it (thereby translating their feelings into language that will invoke similar feelings in the other). This relates interestingly to Plato's simulacra: whereas the raw expression of one's feelings (i.e. the expressionist strategy) may be the "true" or unrefined demonstration, one may create a simulacrum of those same feelings such that it gives the correct impression to the listener (the impressionist strategy).

Trigger Warning - Generation Hugbox

2015-11-02T12:23:51Z

"Free thinking should be dangerous, not safe. A healthy intellectual environment challenges every presumed notion and closely held belief. It should sunder the mind and soul, leaving the individual to put the pieces back together. "Indeed, the left prides itself on being open minded and intellectual, though its actions have shown the opposite."

The Count

2015-11-02T12:23:51Z

00:05

So, this is it. I’m writing this from the coffee shop at the Horsham count, at about midnight. This is my first count, so I’ll try to explain what it’s all about. Obviously I can’t disclose information during the count, so this will be published in the morning once it’s all over.

We’re in a sports hall at Christ’s Hospital School (which fortunately has public gym membership, therefore a decent coffee shop). The room is laid out with a bunch of tables, laid out in a sort of snake. The counters are all one one side, and the candidates and agents are all on the other. They count, and we can watch everything that’s happening from the other side of the tables.

It’s a bit odd just staring at what people are doing like they’re zoo animals, but I guess it goes with the territory. We’re all looking at the ballots anyway. I can’t help feeling that I should help out though!

Whenever a polling station box arrives, it’s dumped out and bundled up into batches of 25 papers. There’s no counting per candidate at this stage, but the agents are watching and keeping their own tallies, trying to get a bit of intelligence before the candidate counting starts in a couple of hours. At this point they’re just checking that there aren’t more votes than voters in each area. I guess also it’ll tell us turnout reasonably early on, though I don’t think we will be told.

As it stands, I’ve seen a few votes for me go by, which is nice. I’ve got no idea how that translates into a percentage, though the agents who are keeping tallies might do. There are lots of agents with clipboards keeping counts, but I’m just wandering around like the aforementioned zoo visitor, gawping.

For now though, it’s quiet and efficient.

02:00

Still going on the preliminary count, but it’s drawing to a close. The counters have checked and bundled the parliamentary votes, and also the local council votes to make sure there aren’t any missed ballots that went into the wrong box. Those will be counted in detail tomorrow.

So we should be seeing the proper count of the parliamentary ballots soon, I think. From looking at the ballots I’ve seen, I’ve certainly got some votes, and I’m probably not last, but I’ve still got no idea whether I’ll hit my own preferred outcome…

There are a lot of party activists hanging around; there are herds of kippers roaming the hall looking grumpy, which makes me happy at least.

Interestingly, the way the ballots are counted, I’m pretty sure that we could get results by ward, and probably by polling station even, which would be really interesting. However, those internal counts aren’t reported publicly. How can we make that happen, I wonder?

03:30

Yeah, the verification step is going on a long time. The 04:30 estimate for the declaration is out of the window. We’ve had three elections (parish, district and parliamentary) in some places, and verifying all of those to make sure there aren’t any votes in the wrong place has taken a long time. We’re just wrapping up the last few outlying wards, and then the next stage will start.

The baskets are out on some of the counting tables for the candidates. The ballots will be separated into the baskets first, then counted. Spoilt or doubtful ballots are separated for inspection as well at this point.

I’m desperate to take a picture of my (empty) ballot basket, but phones are banned in here, and I’m going to play by the rules. Not long though, and we’ll start to get a decent picture of the result and how I’m faring against the other small party candidates.

I’m heading up to the coffee shop to watch the rest of the country’s results coming in every now and again. In general it looks pretty bad for progressives, which is disappointing. There are plenty of morose Lib Dems wandering around here, certainly…

03:45

And we’re off! The ballots are being sorted into candidates. Interestingly, each table has a slightly different method, so in some places you can tell what’s going on, and some you can’t. I can tell straight away though that my target outcome of 5th place is probably not going to happen; the Greens have a good deal stronger showing, by the look of it. Still hoping for 6th though. This is probably going to take a couple of hours yet…

04:00

The coffee shop has closed. FML.

05:30

The basketing and bundling is pretty much done now. We’ve just been round each table and reviewed the doubtful ballots. Lots of “none of the aboves”; we should definitely be counting those properly. Currently they get bunged in with the unmarked and unclear ones, which is a pity. Ideally there should be a box on the form.

Also quite a few voting multiple times, normally with the same number of votes as for the district elections which people did at the same time.

Corrections tend to get accepted and counted for the corrected candidate, BUT in a couple of cases the voter signed their name next to the correction, like you might do with a cheque. Unfortunately that makes it invalid, as the voter can be identified. Even more unfortunately, one of those was mine :(

We’re very nearly there now. The bundles will be tallied up, and we should have an announcement soon, I think. I won’t beat the Green Party, as was my ideal goal, so it’ll be a scrap for the bottom three places. Too soon to tell where we end up. I’m certainly in triple figures rather than quadruple.

07:00

And we’re declared, finally. The candidates and agents get a preview of the final numbers before the announcement, and that’s it. They didn’t get us on stage and do speeches for anyone except the winner (a resounding Conservative victory, obviously). I guess Horsham is too obvious a result to bother with TV coverage.

Anyway, our result. I got 375 votes (0.7%), putting me in sixth place out of eight. Paul also got 320 (0.6%) in South West Surrey. While those might not seem like big numbers, they are probably enough to work with in the next phase of Something New, and to use in whatever comes next. I’ll talk a bit more about what that plan is once I’ve had a sleep.

For now though: thanks to everyone who supported us, with your encouragement, votes, fundraising, and belief. This is only the beginning; a better democracy is coming, and nothing can stop it. It’s just a matter of when.

Mired in muck

2015-11-02T12:23:51Z

Why opening up APIs is not just a developer priority, but a business one

2015-11-02T12:23:51Z

British Pound counterfeit scheme busted, two arrested

2015-11-02T12:23:51Z

Bankymoon Introduces Bitcoin Payments to Smart Meters for Power Grids

2015-11-02T12:23:51Z

Article note: More interesting than you'd think - automated payments is still fairly off the radar of the block chain world, I'd argue.

South African Bitcoin startup Bankymoon has built the world’s first blockchain smart metering solution for modern power and utility grids, VentureBurn reports.

The startup outlined its plans in a presentation titled “Smart Grids and the Blockchain – Bitcoin’s first killer App” at the recent Bitcoin Conference Africa in Cape Town, South Africa. Lorien Gamaroff, founder and CEO of Bankymoon, is expected to give another presentation on May 14 at the Bitcoin Conference in Prague.

Modern “smart grids” permit efficient management of supply and demand, with Internet-connected “smart meters” that react to changing conditions and can be topped in real-time in case of need. According to Gamaroff, by 2023 most power grids will be smart: 80 percent of the grids in the United States, 60 percent in Europe and 45 percent in the Asia Pacific region.

“You’d think that with all the smartness happening in our grid, that the problems are solved,” said Gamaroff. “But, in fact, this brings us to the most difficult and biggest problem of all, which is payments. Your grid could be as smart as you like but if all customers aren’t paying, it’s worthless and it becomes unsustainable and will collapse.”

Bankymoon, founded in 2015, specializes in deep integration of bitcoin payments into current processes.

“The power of bitcoin lies in the ability to program functionality to automatically respond to payment transactions,” notes the Bankymoon website. “Unlike bank accounts, Bitcoin addresses can be monitored by predefined processes which can trigger automated actions. These actions can form part of a workflow which will only proceed once Bitcoin transaction has been detected.”

Bankymoon’s smart meters have their own Bitcoin addresses. When a smart meter receives a Bitcoin payment, Bankymoon calculates the tariff and then loads the meter. Bankymoon’s integration of Bitcoin payments into smart metering systems for modern grids allows users to “send” electricity, water and gas to anybody else in the world, from anywhere, by topping their utility meters.

“Imagine a student abroad who needs to have their meter topped up,” said Gamaroff. “They’d phone their parent and ask them to send money. The parent now doesn’t have to remit anything. They can just go and top up the meter using bitcoin.”

The same model permits donating to worthy recipients, for example schools and hospitals, by directly contributing to their utility bills.

Besides the “programmable money” features of Bitcoin, the existence of large unbanked populations in the developing world shows the benefits of bitcoin payment integration in smart grids. Bankymoon’s solution bypasses banks and credit cards – which many users don’t have access to – and, using an Internet of Things (IoT) approach, goes directly to the smart metering devices.

According to Gamaroff, the application of Bitcoin to smart metering shows how deeply digital currencies can pervasively and positively impact societies. “This [solution] is potentially game-changing for driving bitcoin adoption,” he said.

The post Bankymoon Introduces Bitcoin Payments to Smart Meters for Power Grids appeared first on Bitcoin Magazine.

Teaching BASIC in 2015

2015-11-02T12:23:51Z

Article note: Teaching BASIC today? I'd love to try that.

If you bought a home computer in the 1980s, chances are you learnt a little bit of BASIC programming. The command line interface meant that the difference between starting to play a game and writing a short program was not as big as today, and most of the Commodore 64 User’s Manual was dedicated to explaining how to program your own game or program in BASIC. So for the last few years, our first year Computing Technology: History, Theory and Practice students have had a two hour workshop where they learn to program in BASIC. Here are my notes from the first time I taught this workshop, and the post you’re reading right now gives you some updated ideas.

This is a great class to teach. It’s a simple introduction to a programming language that is of no practical value today, but that was immensely important to a generation of early home computers. The historical value is clear: we use Commodore 64 emulators so get a feel for what computers were really like in the 1980s. It teaches some simple concepts that are important in other programming languages: what is a variable? How do computers follow instructions? Why are programming languages different from each other? And it lets today’s students actually experience working with a command line interface, where you can’t use the mouse and the computer doesn’t register what you typed unless you press enter. Also, it’s very easy to start programming, so there’s instant gratification.

And you can use Nick Montfort, Patsy Baudoin, John Bell, Ian Bogost, Jeremy Douglass, Mark C. Marino, Michael Mateas, Casey Reas, Mark Sample, and Noah Vawter’s wonderful book 10 PRINT CHR$(205.5+RND(1)); : GOTO 10 (MIT Press 2012) which is also available open access as a free PDF. I assigned the first section of the book, which goes through that one line program step by step in a very enlightening manner. You could certainly ask students to read other sections of the book as well.

I’ve got worksheets all worked out so it’s a prepackaged two hour session. Feel free to borrow, steal or adapt. Here is the worksheet I give students as a PDF, and here it is in Word format, in case you want to edit it.

Before you start, install VICE (the Versatile Commodore Emulator), which you can download for almost any platform, or use a web-based Commodore 64 emulator like côdeazur’s Flash-based FC64.

Start the class off by talking a bit about early home computing, and show students this 1983 ad for the Commodore 64 to show them how programming was marketed as a really attractive aspect of home computers.

Once students have got their emulators fired up, explain that the C64 keyboard layout is more or less like a modern US keyboard, but when you press shift you get fancy symbols, so the characters shown on the screen won’t always match what your keyboard says. You can refer to these keyboard layout diagrams.

Some students take quite a while to figure out the command line interface. The computer (well, emulator) won’t process what you type until you press enter at the end of a line. Using the arrow keys to go up and fix a typo won’t work unless you actually press enter for each line you changed. This is not a graphical interface.

Then I hand out worksheets and let students work their way through them. I walk around and help students who are having trouble with the command line interface.

Let’s start. Type PRINT “HELLO WORLD” and press return.
What’s the difference between PRINT 2 + 2 and PRINT "2 + 2"?
Make a program by using line numbers. We use 10, 20, 30 rather than 1, 2, 3 so that it’s easy to add new lines in between if needed.10 PRINT “HELLO WORLD” 20 ENDType RUN to run your program. Type LIST to see the program code. Try adding a line:
15 PRINT “IT’S A LOVELY DAY"Remember this is a command line interface. You can edit lines in the program by using arrow keys to get to the line and typing over the existing words. Then press RETURN or the computer won’t pay any attention to your changes. Another way to edit is to wait for the computer to say “READY” and give you a cursor. The type the line with the error all over again, and press RETURN. Now type LIST and the computer will show you the whole program, with your corrected line.
To start a new program (and get rid of the old one!) type NEW.
Now try a GOTO loop:10 PRINT “HELLO WORLD” 20 GOTO 10Press ESC to escape the endless loop. This maps to the RUN/STOP key on the original Commodore 64.
REM lets you add comments to your code. Add some.30 REM THIS IS A NOTE TO MYSELF THAT THE COMPUTER WILL IGNORE.
We need variables:10 PRINT "TELL ME A NUMBER" 20 INPUT X 30 PRINT "YOU LIKE THE NUMBER " X "?"Now type RUN. The computer will show "TELL ME A NUMBER" on the screen and then a ? and a blinking cursor. That means it wants you to type something in. Now the variable X is set to the number you typed. When your program finishes running, you can try typing “PRINT X” (without line numbers, just as a command) and the computer will show you the number you typed in. It’s in memory now, not just part of the program.
Now try a text variable (a string). If you want a variable to contain text and not just numbers, you need to put a $ at the end of it.40 PRINT "WHAT IS YOUR NAME?" 50 INPUT NAME$ 60 PRINT "HELLO " NAME$
Play around and see what you can do with this. After a bit of messing around, we’ll do a show and tell.
Let’s try an IF-THEN loop:
10 PRINT "WHAT IS YOUR NAME?" 20 INPUT NAME$ 30 IF NAME$ = "ENOUGH" THEN GOTO 50 40 GOTO 20 50 ENDYou can use other operators than the equal sign, like lesser than < and greater than >. <> (is lesser than or greater than) means NOT EQUAL TO. So:IF NAME$ <> "CORDELIA" THEN PRINT "I REALLY PREFER THE NAME CORDELIA"
Play around a bit more. If you get stuck in an endless loop, you may have to reset your emulator – use the file menu at the top to find the reset options.
OK, now we’re going to look at an example. Type this program in and see what happens:10 PRINT CHR$(205.5+RND(1)); : GOTO 10How does this work? Hints: have a look at (or Google) the RND command and the Commodore 64 character set. Now, what can you make, using what we’ve learnt?

OK, that’s all we really have time for in a 90 minute class session. If you come up with improvements or other ideas, I would love to hear about them – please post them in the comments!

From Coincidensity to Consilience

2015-11-02T12:23:51Z

In my post From Convenience to Consilience - “Technology Alone Is Not Enough" (October 2011), I praised Steve Jobs for his role in the design of the Pixar campus, whose physical layout was intended to bring different specialists together in serendipitous interactions.

Thanks to @jhagel and @CoCreatr, I have just read a blogpost by @StoweBoyd commenting on a related project at Google to build a new Googleplex. Because this is Google, this is a bottom-up data-driven project: it is based on a predicted metric of coincidensity, which is sometimes defined as the likelihood of serendipity.

With the right technology (for example, electronic monitoring of the corridors and/or tagging of employees), a corporation like Google can easily monitor and control “casual collisions of the work force”.

But as Ilkka Kakko (@Serendipitor) points out, such measures of coincidensity cannot be equated with true serendipity. I wonder whether Google will be able to correlate casual meetings with enhanced knowledge and understanding, and measure the consequent quantity and quality of innovation? And then reconfigure the campus to improve the results? Hm.

However, the principle of designing physical spaces for human activity rather than for visual elegance is a good one, as is the notion of evidence-based design. Form following function.

Stowe Boyd, Building From The Inside Out (February 2013)

Paul Goldberger, Exclusive Preview: Google’s New Built-from-Scratch Googleplex (Vanity Fair, February 2013)

Ilkka Kakko, Are we reducing the magic of serendipity to the logic of coincidence? (April 2013)

My first collection of stories!

2015-11-02T12:23:51Z

I (self!) published my first collection of short-stories today. It’s an A7-sized volume with 6 stories, totalling less than 600 words; all were written in sessions at the Not-For the Faint-Hearted workshop. Rosy Carrick said that it was “The best collection of stories I’ve ever read“, and you can trust her as she’s almost a doctor. If you’d like a copy, let me know and I will post it to you next week.

(The next Not for the Faint-Hearted Session is on April 13th)

Thanks to Natalie Downe whose pocketbook template was used for the layout. So much better than having to lay everything out by hand using my terrible writing. I’m thinking of doing a tiny travel-guide to India next).

Electoral Numbers

2015-11-02T12:23:51Z

Article note: More interesting than you'd think - automated payments is still fairly off the radar of the block chain world, I'd argue.

Last night I went around rounding up signatures for nominations, and checking the signers against the electoral register. This is a short story about consistency of naming and data.

The form has two columns for the “electoral number” for each signer. The headings on mine were “Distinctive letter”, and “Number”.

The register itself has three columnns. The first is called “Elector Number Prefix”; the second “Elector Number”, and then “Elector Number Suffix”.

Nothing I could find explains what the mapping is, or gives an example of the format expected.

After looking at nomination forms I found on the web in other constituencies, I satisfied myself that the prefix and distinctive letter were the same thing; the ward identifier, normally made up of 2-3 letters (not one!).

That just left the number.

In the register, the names are arranged by address, and each is given a consecutive number. So I might be 124, and my wife at the same address might be 123 (as she’s before me in the alphabet). Our next door neighbours might be 125, 126, etc. The suffix for all of these is 0. However, some people have the same number as someone else in the same household, and a suffix of 1 or 2. I assume this is for people who are newly-registered at the address since the register was created.

So, my assumption is that the elector number is the number and the suffix, making my number 124/0, not 124. That way, a new voter in my household could be 124/1, 124/2, etc. It’s like numbering your lines 10, 20, 30, back in the early days of BASIC, so you’ve got somewhere to fit more stuff in.

However, having emailed my completed forms over ahead of my appointment tomorrow for an informal check, I find this is wrong. The suffix is only included in the number if it’s non-zero. So, I’m 124, and the others would be 124/1, 124/2, etc. Fortunately I can just cross off the zeroes and don’t have to get everyone to sign a new form.

Someone here isn’t aware of the difference between zero and null¹. This is why computers have a hard time with fluffy human-created data.

The discovery of zero was a major milestone in maths. Is the discovery of null equally so? Hmmm. ↩

Crowdfunding the election campaign

2015-11-02T12:23:51Z

Article note: Political funding is becoming more important than voting, I think.

After rather a long delay, I’ve finally got my crowdfunding campaign launched for the election. This is a big part of the whole thing, and not just because it raises the money I need to do this right.

It shows that it’s possible to stand without rich donors bankrolling you. Limiting party donations to individuals only (and only up to £5000) is part of our manifesto, so it’s important to show that it can work!
It helps our transparency agenda; we’ll be publishing the details of all our donors (not just those we have to) in our open accounts, so everyone can see who’s backing us.

What’s it for?

I’m raising money for the following:

£500 for the election deposit. This is the initial goal set on the campaign, and that means I can stand. We’ve already hit it, so the game is afoot!
Around £1500 for leaflets. The Royal Mail will deliver a leaflet to every home for free for each candidate, but we need to print them. This gets us 50,000 leaflets, one for every home in the constituency.
Another £500 for fliers to hand out in the high street. This is less essential, but it would be good if we could do it. The figure here is a bit of a guess though, I’ve not got quotes yet.
£500 for “other” expenditure. We’ve got various costs for renting rooms, advertising on Facebook (though that’s pretty ineffective), and so on. This is a very vague figure, and if we don’t use it all, money will go to central party funds for other campaign costs.

So, all in all, that’s why the stretch goal on the crowdfunding campaign is £3000. We need £2000 to scrape by as a useful campaign, but the more we have the more we can do!

Bear in mind that all this will be published openly in our accounts, which are 100% transparent, so there’s no danger of your money being funnelled offshore to my swiss bank account, or something.

How to crowdfunding

When I first started looking at crowdfunding last summer, it was all a bit vague. The Electoral Commission weren’t quite sure, and none of the crowdfunding sites had really done it before. Since then, however, as I’ve been busy doing other things, it’s all changed. Crowdfunder have put the work in to supporting political campaigns, and have even written a handy guide on how to do it.

They’ve got a massive number of political campaigns on there now, covering all the main parties, so it was a no-brainer to use their expertise.

What we did

I delayed a long time because I thought I had to have a video to promote it, and that was tough to get together. Eventually time just got so short that I went ahead and launched with the minimum viable campaign. I’ll add a video later to push up donations; we need to record one anyway, so it all helps.

We chose non-physical perks only, due to fulfilment demands which would probably cause a lot of trouble, and because I wasn’t sure of the rules around donations when part of it is a purchase (of a mug, say).

The perk design was tricky - I really wanted to avoid cash-for-access. I’ve seen a whole load of supposedly progressive fundraising campaigns where a reward is to go to the pub with the party leader, or candidate, or something. I’m not 100% sure how this is different from rich Tory donors getting to go shoe shopping with Theresa May, so I really wanted to stay away from it.

Instead, I chose high-level rewards that do involve personal contact, but in a public and open setting; for instance, you can come on our podcast, or have me come and talk about the future of democracy at an event of your choice which we’ll publish online after.

Finally, the target. Crowdfunder recommend having a minimum goal and using stretch goals for the ideal amount. So that I knew I’d be able to stand, I chose the deposit amount, £500, as the initial goal, and have set a stretch goal for the £3k we want to get. I’m not 100% sure that’s the right way to have done it, as now we’ve raised over £600, we look like we’re done, which we’re very much not. I don’t know really.

GIVE US YOUR F**KING MONEY

So, the crowdfunding is now live, and will run for another 3 weeks. If you’re reading these blogs, and finding my journey interesting, I really need your help to make this happen. We’ve got enough to stand; now we need to raise enough to get a leaflet through every letterbox. If we don’t do that, we might as well not bother.

So, please give generously, tell your friends, and spread the word. It’s down to you.

Distributed Oversight: Custodians and Intermediaries

2015-11-02T12:23:51Z

Article note: Good in-depth look at Bitcoin as 'property' and what 'ownership' does or doesn't mean.

[Note: This past weekend I took part of a working group at Stanford University as part of the “Blockchain Global Impact” conference — and we discussed some of the legal issues surrounding digital bearer assets. Below is my written submission provided beforehand; I am not a lawyer but I did consult with several attorneys familiar with the Bitcoin ecosystem who provided feedback, some of which was incorporated.]

The prevailing view in the bitcoin community is that control, by virtue of knowledge of a private key, is synonymous with ownership of the contents of the associated address. In other words, bitcoin is often touted as a form bearer instrument. With the advent of “exchanges” and “hosted wallets,” the ecosystem birthed facilitators (custodians) and intermediaries (depositories) where an individual no longer controls the applicable access credentials.

As Professor Shawn Bayern noted, the nature of the rights one has with respect to directly-held bitcoin differs significantly from the indirect interest in bitcoin in an account held by a third party: “[As] a matter of law, the [user of an exchange or wallet] probably does not ‘own’ any bitcoins, at least not in the sense of having title to personal property corresponding directly to bitcoins. What the [party] has is simply a contract right against the operator of the website—what was classically, at common law, called a chose (i.e., thing) in action.”

What is the nature of this right? Does the user still own the bitcoins held at an exchange or wallet? Or, instead, has title passed to the wallet/exchange? If title remains with the user, the user might be termed a bailor and the exchange/wallet a bailee. On the other hand, if title has passed to the exchange/wallet, the user would likely be a creditor and the exchange/wallet a debtor. Of course, the user agreements are far from clear on this point. As it turns out, the first question you ask to determine whether a transfer of title has occurred is: does the transferor receive the same exact thing or merely equivalent things that was put in? If the former is true, a bailment may be possible (this is often referred to as safekeeping or custody). If the latter is true, the transaction would not be a bailment except in three specific cases discussed later below.

In terms of both funding and development, the two largest VC-backed verticals in the Bitcoin ecosystem are “exchanges” and hosted wallets – both of which often offer “vaults” called “cold storage” and sometimes some type of insurance for customers. The precise legalities of providing other services such as “tipping” is beyond the scope of this brief article. Suffice to say that at this time, there is probably no US-based VC-backed startup that is fully compliant with all deposit taking laws, money transmission laws, insurance laws and so forth.

Yet irrespective of personal views as to whether or not additional regulatory compliance should be expected of these nuvo financial intermediaries and custodians, one aspect that all startups can and would agree on is the need for “best practices” in financial controls. But this then circles back to legal compliance.

For instance, every funded exchange as of this writing pools their clients deposits into a shared hot wallet which is then dispersed into a cold wallet (which sometimes is further broken into “ice cold” or “glacier” wallets). Yet despite this element of security – or at least security theater – deposits can and have been expropriated by knowledgeable insiders including exchange operators themselves. Commingling customer bitcoin effectively forecloses the possibility of bailment/custody because, once commingled, the user is unlikely to get the “same thing” bank that they put in.

How can the technology being developed in the larger Bitcoin ecosystem be used to mitigate or prevent his from happening? And more importantly, how can entrepreneurs structure their startups to be in compliance with the law?

In its BitLicense proposal to the New York State Department of Financial Service, the Crypto-Economy Working Group outlined several technology solutions including multisig, escrow, proof of reserves, proof of solvency, keyless wallets and continuous real-time auditing. Empirically we have seen the rapid growth in the use of multisig via a technique called pay-to-script-hash (P2SH) – a method which at the start of 2014 represented roughly 0% of all bitcoins yet now at the time of this writing encompasses about 8% of all bitcoins. That is to say, possessors of those direct and indirect interests have moved 8% of the bitcoin money supply into a multisig schema.

BitReserve is a VC-funded startup that has spearheaded the proof-of-reserve initiative, providing near real-time data of the assets in their “reserve” (cold wallet) and the liabilities or obligations to its depositors. Several other companies have attempted to position themselves as “keyless wallet” providers, most notably Blockchain.info. They claim to be a software company that has no access to user funds, keys or information – solely providing a website that generates a “wallet” based on a multi-word mnemonic that users must memorize or store as it is the sole access credential to “direct interests.” This type of segregation not only prevents maleficence from internal administrators but may also prevent Blockchain.info from being legally defined as a depository or custodian in some, if not all, jurisdictions.

But what happens if Bob loses this mnemonic? Then Bob loses control of the property, the bitcoin becomes inaccessible, ownerless (in our eyes) yet still exists as an entry on the blockchain.

Who does it belong to then? Did the network “steal” it? Its last legal owner was Bob, but to the Bitcoin network there is no distinction between ownership and possession. For instance, stealing is a legal term – not a physical phenomenon – thus whether it is rightfully transferred or not is the subject for legal scholars to debate.

Recall that the job of property systems is to associate the who(s) with the what(s). There is no infallible magic bullet. It is merely a question of best evidence. While possession and control is a pretty crude form of evidence but often nobody has better evidence of ownership. Registration is pretty good evidence but it can still be overcome. Think about a piece of artwork that Bob consigns to a gallery or that he registers. Or a title to his house. No matter what the title search says, Bob can never really know somebody won’t come out of the woodwork with better evidence of ownership. The question is really: how much protection does the law provide to an innocent purchaser for a particular type of property in a particular situation? This is still an open question with bitcoin.

What of bailments then? Does this distributed technology change the legal relationship between a bailor and bailee?

The term custody is reserved for bailments. After some consultation it appears you can only have a bailment when you get the same thing back that you put in and with “pooled” bitcoins, a depositor does not receive the same unspent transaction output (UTXO) as they originally deposited. Exceptions include: (1) fungible goods in warehouse; (2) currency in a particular type of bank account (special deposit); and (3) security entitlements (immobilized securities or pieces of a securitized pie). Bitcoin is not a good. Furthermore, hosted wallets are not warehouses. Bitcoin is not currently a legally defined currency and hosted wallets are not banks. A third idea is the trust company/broker dealer. While an entrepreneur may be able to secure a trust company charter, it has yet to be seen in the wild. And it is probably only scalable for a limited subset of uses and actors.

So, if we don’t have a bailment. We have something else. Again, after consulting with experts, we likely have a transfer of title and a corresponding debt owed to the depositor. If that is “checkable” or repayable upon request of depositor, then certain startups may have a problem under 12 USC 378(a)(2).

This seems to be the model that most startups has assumed is legally allowed. In fact, as of this writing, several VC-backed hosted wallets grant a “security interest” only on bitcoins they own. Alice’s hosted wallet startup may claim that “our bitcoins are insured.” Thus, if we were talking bailment, they would not be Alice’s startup’s bitcoin as the title would remain with the bailor (not Alice’s hosted wallet – who would be known as the bailee).

Now that organizations such as the Consumer Financial Protection Bureau (CFPB) have taken an interest in the Bitcoin ecosystem, how then, can Alice explain this to a consumer in a way that is not unfair, deceptive, or abusive? Is there anything in the technology that can help provide transparency and mitigate abuse?

In practice Alice will need to at least explain the effect on title in a manner that is consistent with reality. And she will likely have to be licensed, regulated and supervised to the same degree as others who operate in the same manner. While laws may change, it does not appear that a hosted wallet company falls within a loophole (currently).

In essence, there is a distinction between a facilitator and an intermediary.

And again, an intermediary is an institution that invests primarily in financial assets and that issues liabilities on itself (e.g., deposits). And a facilitator facilitate the financial transactions between intermediaries and their counterparties. They may hold some financial assets but their holdings are incidental to their facilitating roles. Custodians and money transmitters are the latter. Depositories are the former.

The questions for this working group should take these definitions into consideration and brainstorm how the technology being developed can not only help reduce the compliance requirements (if there is any leeway for that) but also fulfill financial controls “best practices” with respect to existing consumer protection laws.

A special focus should also highlight how exchanges operate in practice, that is to say, since they know the trading history, margin positions, when futures contracts will expire and other customer information – there is potential vectors of abuse such as front running and naked short selling by insiders. How can this be prevented, reduced and stopped?

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Provision of Service Attack

2015-11-02T12:23:51Z

Running for election really does give you a different view on some things.

Until last year, I was pretty opposed to clicktivism; you know, the 38 Degrees style of campaigning where hundreds of people will send an identical email to their candidates or MPs to tell them where they stand on something.

I’d softened a bit after I chaired a Cleanweb London event on online activism, but generally I subscribed to the more traditional view that fewer well-crafted letters were a better way of doing it.

Denial of service

I’ve heard stories of other candidates who were unable to get anything done other than just emailing back to bulk messages, replying to each email individually!

Now, that may still be the case for most people in politics, but for me it’s utterly changed over the last few weeks.

I love 38 Degrees emails and the like. I love days where a campaign obviously kicks in and I get over 100 emails about TTIP, or something like that.

Many candidates will see this as spam, but not me. Why not? Because I know how to handle it. Because I can use it for what it is.

Provision of service

We’re using NationBuilder to run the campaign; it handles the website (though I hate CMSes and would be happier with Jekyll, but whatever), but most importantly it handles our contact database. All the emails we get to official addresses come into the system and get flagged for followup.

On a 38 Degrees day (as I’ve come to call them), this followup list gets pretty big and the load is unmanageable for a human.

But all the emails are useful. They give me an idea of who cares about what, and more specifically, where they live and their email address.

To build my database of potential voters, this is amazing. Suddenly I have 100 more people who I know care about certain things, whom I can email about events, updates, blog posts, etc. People who want to hear back.

Deploy the robots

So I’ve created a script that helps manage this. It’s open source, so if you want to do the same, you can.

Here’s what it does:

Looks at all the open followups in NationBuilder, and for each one:
Get the email text that need replying to
Work out who the email is to, and reassign it to the right person (for campaigns that aren’t using the right addresses).
Look for certain consistent text in the email to identify the campaign, and apply a tag.
Find the address, and run it through Open Addresses’ Sorting Office app (which I helped write at work) to turn it into structured data. Note we don’t submit the address into Open Addresses, as even though the existence of an address isn’t personal information, it feels like it is, and I don’t want to annoy anyone.
Set the address for the sender back into NationBuilder. This also does auto-assignment to wards, constituencies, etc.

This runs every hour using the Heroku scheduler.

There are a couple of gotchas. The NationBuilder API is great, but one thing it can’t do is get followups and email content. That made it a fair bit harder, and I have to actually drive the website (using Capybara and PhantomJS) and pretend to be a real human user in order to read the emails. It works OK, but it’s brittle and very slow.

Also, reliably extracting the address is hard and varies across campaigns. I’m hoping to improve Sorting Office itself to do this job, so I can just drop the entire email into it and get back the address only.

Back to humanity

So now, instead of a ton of emails, I have a load of tagged contacts in NationBuilder. It’s then easy to build a list of people who want to hear back on a particular subject.

At this point, I make sure I read the email properly, look at the links, and write a blog post in response.

I can then, every few hours, send a bulk email back to the senders with a quick answer, a link to detailed the blog post, details of our party and campaign, and links to things like upcoming events. The open and clickthrough rate is surprisingly good.

So, all in all, once this is up and running, handling a high-impact day of emails takes only a few clicks, and each sender gets a well-thought-out response and ways to engage further.

I have to admit, as well, that I get a certain amount of pleasure from imagining the inbox of my opponents on days like these.

Wishlist

If you’re running these bulk email campaigns, here are a few requests:

Update your data regularly. YourNextMP is doing a sterling job of maintaining candidate lists, and contact details. Make sure you’re up to date, and make sure your email gets to the right place.
Make sure the address is easily-parsed; well-separated from other text in a predictable way, and not shoved together with phone numbers, names etc. You could integrate Sorting Office into your own applications to help with this, if you want to be proper amazing.
Add some sort of unique campaign identifier that people can’t change - it’ll help me tag things. Also, maybe a suggested hashtag?
Make sure you include the originating campaign link. I get that you want it to look like it’s only written by the constituent, but honestly, on that you’re not fooling anybody. Often I actually want to share it on as well!
If you really want to help people like me, then make all the important metadata machine-readable. I’m talking about a JSON attachment or something, containing a structured address, name, other contact details and the unique campaign ID.

If you’re NationBuilder, please let me fetch emails via the API. You don’t really want me scraping your site, after all, the overhead is huge!

And last of all, if you’re a candidate, then you’d better accept it’s time to tool up. Your voters have new opportunities to engage, and you’d better be ready to handle them. The future’s not slowing down just because you’re not ready.

Shedding Light on the Slightly Strange: Lantern Slides from the Booth Museum Collections

2015-11-02T12:23:51Z

It was a chill November evening. A handful of eager observers were gathered together in a darkened corner of the Booth Museum. They gazed at the illuminated picture thrown onto the wall by the magic lantern in the corner. The picture showed a seated figure, with some kind of implement in one hand, pausing for a moment perhaps to regard his work. But the observers would never know because they could not see his face. Indeed he had no face! Above his shoulders was simply a dark whooshing, melting chaos of inky clouds…

“And this,” I announced, “is one of my favourites.”

Last November I was lucky enough to participate in A Curious Night of the Slightly Strange at the Booth Museum. As a long time lantern enthusiast I was aware that the Booth’s collections included magic lantern slides but had never seen them. On this occasion I was given permission to project some of the slides for the entertainment of the visitors. John Cooper, Keeper of Natural Sciences, kindly fetched out a few boxes for me and his random choices brought to light a couple of interesting trails…

Little information is known about the origins of the Booth slides. As in so many cases, they have been amassed over the years from various sources primarily to be used for giving lectures. Lantern slides are the PowerPoint of the past and were not necessarily regarded important enough to be part of a museum’s ‘official’ collections. However today they are recognised as an obsolete format rich with history, and thus their cultural significance has been elevated.

The subject mater of the slides I had been given to look at were a mixture of natural history and archaeology with a few other oddities thrown in. Below you can see a selection of my favourites, including the amorphous artist already introduced (whose missing face was possibly caused by overheating of the glass).

One of the boxes had a paper label attached which read ‘W.S. Rowntree, 15 Chatsworth Road, Brighton’. Chatsworth Road is just round the corner from the Booth Museum, so it may be that Mr. Rowntree was a regular visitor who donated his slides. Some of the slides in the collection had been given by members of the Brighton & Hove Natural History and Philosophical Society (active from 1854 – c.1960). Searching on the internet I found a reference to a W.S. Rowntree in a 1912 issue of The Leightonian, the magazine for Leighton Park School.

Here I read that after thirteen years of teaching, Mr. Rowntree is leaving and ‘opens his season as a public lecturer, whose programme has in it many well-known schools, including Harrow, Brighton College, Ardingly, and Hurstpierpoint.’

Could it be that this is our Mr. Rowntree and that these are his lecture slides? Certainly a line for further investigation…

The other point of interest came from a ‘maker’ of slides rather than an owner. A few of the slides were labelled ‘Coloured by C.H. Cobbold, 54 Stirling Place, Hove.’ One features raccoons and another, a bunch of snowy bunnies.

This time an internet search for the name brought me to the Cobbold Family History Trust website. Here, a present Mr. Cobbold (Anthony) who runs the site announced that he had acquired two sets of C.H.’s lantern slides but that he had no further information as yet. We struck up a correspondence and made a mutual agreement to exchange any future discoveries regarding Cobbold, Colourist of Hove.

And so will these mysteries, revealed by the Curious Night of the Slightly Strange, be resolved? Only time will tell…

If you would like to see magic lantern in action join me for:

Beneath the Whispering Sea at Brighton Museum on 12 March

A Bite-Size drop in demonstration at Brighton Museum on 21 March from 12–1pm

The Film Galleries at Hove Museum have a permanent display of magic lanterns, slides and a slide show you can watch in the mini cinema.

Admission to Hove Museum is free, see the current opening hours for Hove Museum

Alexia Lazou, Collections Assistant

Facebook Takes Over The World

2015-11-02T12:23:51Z

Article note: ...and all this time, content distributors were worrying about pirates. Really, it's anyone removing delivery friction.

Some depressing reading. I've been saying for a while that Facebook has basically "reinvented television", the stream fed to passive consumers, reflexively channel surfing or hitting a "like" button like pigeons in a Skinner Box.

But I hadn't realized that it's quite as bad as this. Read these excellent articles from The Awl :

What is the blockchain hard fork “missile crisis?”

2015-11-02T12:23:51Z

Article note: Hardcore technonomics discussion on the effect of increasing Bitcoin block size. in depth but/and fascinating if you're into the really new stuff that the cryptocurrency paradigm brings.

Over the past couple of months there has been a number of discussions revolving around increasing the Bitcoin block size from its current 1 MB limit to 20 MB. One such plan is Gavin Andresen’s proposal (this is not to single him out as there are others with similar proposals). The code change itself is trivial, as it can simply be changed to any arbitrary number in a couple of keystrokes (for instance, see Vitalik Buterin discuss this at 14:15).

However, getting the majority of validating nodes, miners and the rest of the ecosystem on-board in a timely fashion is a very non-trivial matter.

Recall that, as illustrated by Organ of Corti and Dave Hudson, the average block size has increased over the past year to the point where we will likely max out at around 3 transactions per second with the current 1 MB limit. Since many of the investors, developers and entrepreneurs in this space would like to make Bitcoin ‘competitive’ to other payment platforms such as Visa, according to their view, this number eventually needs to increase by several orders of magnitude.

Fundamentally there are two trade-offs in block size economics:

Keeping a 1 MB block size requires higher fees to end-users but results in a more decentralized network
With a larger, 20 MB block size, fees are (temporarily) subsidized to end-users but with fewer validating nodes on the network

A quick explanation of both:

Retaining a 1 MB block size ultimately results in higher transaction fees because block space is scarce and miners will only process and include transactions based on market-based prioritization rates (e.g., pay higher to be included faster). While this would likely mean the end of certain types of transactions (such as “long chain” transactions) as well as fee-less transactions which have disproportionally increased the size of the blockchain over the past six months relative to actual commerce, simultaneously this design decision would have the effect of retaining some nominal decentralization as the increase in blockchain size would remain relatively linear and thus the blockchain could be validated by several thousand nodes as it is done today without (much) additional cost.

In early March 2014, there were approximately 10,000 nodes however over the past year there has been a decline by roughly 1/3. What does this distribution of roughly 6,400 current nodes look like?

Recall that the original value proposition of the Bitcoin blockchain was its decentralized characteristic, thus the more miners and validation nodes that are geographically distributed, the less prone the network is to single-points of failure. Furthermore, while many people call the various artifacts that have increased the blockchain size “bloat,” because this is a public good and no one owns it, it is imprecise to do so (e.g., one man’s 80 byte “trash” OP_RETURN is another man’s data storing “treasure“).

Whether consumers are sensitive to this change in fees is another matter due to elastic demand, they may simply switch over substitute goods (e.g., competing chains and ledgers). What does this mean exactly?

An increase to a 20 MB block size would likely continue the same “low” fee (donation) structure practiced and promoted today as there is purportedly more room for non-priority transactions. The known challenge however is that if 20 MB blocks became “filled,” this would require a corresponding increase in bandwidth and disk space which would require more costs to be borne by the validating nodes which are already operating as public goods. That is to say, a blockchain that increased in size by 20 MB every 10 minutes would fill over 1 terabyte a year which would create additional costs for participants and likely reduce the amount of verification nodes and therefore reduce the decentralization of the network.

The other challenge to Andresen’s plan is, that because the prioritization of transactions would still not be adjusting towards via fees to miners, this would in turn continue the status quo in which miners continue to largely rely on seigniorage to operate. This is an unhealthy trend as it stalls the transition from block rewards to fees which was the narrative stated since day one on October 31, 2008 (see section 6).

What will happen?

It is difficult to predict what exactly will happen as the key actors in this space are still deciding what to use social capital on.

Gavin Andresen, as recently as two weeks ago, stated that most of the large payment processors, exchanges and other service companies are on-board with his plan (see also David Davout’s recent dialogue with Andresen). Furthermore, others in the community have (likely erroneously) found correlation between market cap and transaction volume yet as we know, correlation does not actually imply causation. Similarly, ‘Death and Taxes’ recently presented a narrative reinforcing Andresen’s view yet for some reason glossed over the all-important miners perspective. Others, such as in the ideological wing personified by Mircea Popescu claim that they will fight this effort with an actual attack.

Irrespective as to what size a block is increased to, it will likely create at least a temporary fork as validating nodes need to upgrade and they are not being compensated for storage and traffic (Andresen’s plan is to “future proof” the protocol such that the 20 MB change is included in a patch this year but isn’t “turned on” until needed later on). There is at least one open question: what is the minimal amount of full nodes that are required for network to operate within current trust/security model? Unlike miners, their value to the system is hard to measure.

What the experts say

While the field is young, one expert in this space is Jonathan Levin who modeled network propagation in his masters thesis. I reached out to him and in his view:

I think that the 20mb proposal is untenable given the current way that blocks are propagated around the Bitcoin network. The Bitcoin network and specifically the Bitcoin miners use a gossip network to relay blocks to each other. That means that as the size of the block increases, the time that it takes to spread around the network also increases linearly. We have seen this first in the work of Decker and Wattenhofer as well as my own work.

The problem is that the increased time that blocks take to propagate around the network increase the probability of orphan races between different mining pools. If you create blocks that are 20mb and a competing pool is creating blocks under 1mb or even empty ones, they have a higher expected return per hash. This is because you would expect your blocks to lose out to smaller blocks in an orphan race if both are found in quick succession. Now we can argue that miners will continue to create large blocks out of altruism but if we continue to increase the size of the blocks without greater utilisation of better block relaying protocols we risk breaking this equilibrium and miners resorting to nasty strategies like creating empty blocks which suit no one.

I also spoke with several other professionals in this space.

For instance, I spoke with Atif Nazir, co-founder of Block.io and an instructor at Blockchain University. According to him:

On the one hand, increasing block sizes, as you say, may result in lower transaction fee requirements. However, if the transaction fees actually are lowered by, say, 1000x what they are now (0.00001 is the minimum accepted by the reference client), this will lower the cost of “institutional attacks” on the Bitcoin infrastructure, where an attacker can push 1000 transactions for an erstwhile cost of 1. The attack will basically be “make infrastructure expensive to run for the average joe, drive them towards centralized infrastructure services that run APIs, Blockchain Explorers, etc.” It is good for business, bad for the decentralization of the network in the near term.

We’ve seen something like this occur on the Dogecoin Network in the past few months, where one user or a group of individuals were pushing transactions with 0 transaction fees. These transactions were accepted as valid by the Dogecoin reference clients, and as a result, caused bandwidth consumption hikes for the dorm-room nodes, which populate most of the current network(s). The resulting change by the Dogecoin Core team was to add a fee of 1.0 DOGE for every transaction, which isn’t yet mandatory, but is on its way there. The dorm-room nodes, however, are already on the decline in both Bitcoin and Dogecoin due to the increasing size of the Blockchain, and the bandwidth consumed by them.

Increasing the Block sizes sounds like a good idea for the number of transactions flowing on the network, but in the near term it will drive a lot of the nodes out of the system because of CPU/bandwidth/disk IO hikes. Increasing the Block sizes will definitely increase infrastructure costs, driving more users towards centralized places that can afford to host API services for the Blockchain. However, given this crunch on the average joe Bitcoin nodes, this will lead to a more concentrated effort towards “pick what you need” style nodes (say, SPV). Again, in the near term, the number of “full nodes” on the network will dwindle, but as more companies come into the ecosystem, this number will inevitably rise.

Bitcoin as a whole is headed towards a network where most nodes don’t actually host the entire Blockchain — increasing the block size will only accelerate this change. This will lead to more innovative solutions, and who knows, we might find a way for nodes to communicate cost-effectively rather than the current “gossip”-style protocol we use, where you inform all your peers when you hear about a new transaction. The community can very dynamic, and I think the longer term outlook for the network looks good regardless. Bitcoin is powered by nerds like you and I, and we tend to find solutions where others walk away.

Nazir raises an interesting point in terms of a hypothetical time horizon for when a transition (between short term and long term) could take place.

Another individual who has done a lot of modeling of incentives, mining and block sizes is Dave Hudson, a software developer who also writes at HashingIt. According to him:

Changes to the distributed consensus software within Bitcoin raise really interesting questions about the evolution of cryptocurrencies and how truly decentralised they really are. With each change we’re actually seeing something interesting happen where the ongoing participants in the system all effectively agree to move to a new system: BTC becomes BTC’ becomes BTC”, etc. We might be calling BTC” Bitcoin but any legacy nodes running BTC’ or BTC also think they’re Bitcoin too. At some point in time something happens and the various systems start to disagree about what is or isn’t valid and those could be very subtle. Imagine for example that BTC” introduced a subtle change that inadvertently made some of Satoshi’s coins unspendable; nobody might ever know until someone with Satoshi’s keys tries to spend their Bitcoins. Arguably it might already have happened as the result of some random compiler bug (not a fault in the Bitcoin-core code, but a bug in the way that’s transformed into something that runs on the node CPUs).

Clearly the Bitcoin-core developers try very hard to ensure that this sort of thing doesn’t happen by accident, but in order to sustain all participants holdings within the system they really do have to try to ensure that every node moves from BTC to BTC’ to BTC”, etc. In order to do this they essentially have to persuade everyone to migrate to each new version within some specific time window.

Now let’s imagine for a moment that instead of miners all tending to mine through centralised infrastructure (mining pools), that we really did have true decentralisation and had hundreds of thousands, or millions, of nodes that all did their own transaction selection and mining. Perhaps they’re even embedded into things that their users didn’t even realise were contributing to mining. At this scale it would probably be almost impossible to get them all to move to adopt a planned fork. We would either see the protocol totally stagnate or else we would see potentially very significant forks occurring.

In practice the system holds together in a cohesive way because, in the absence of a precise protocol spec, the core devs try to ensure that everyone uses the same consensus-critical software, runs it on the same sorts of hardware that all do things the same way and with some reasonably consistent set of capabilities.

It’s seems a slight irony that one of the key factors in the successful maintaining and sustaining of the Bitcoin network is continual centralised actions, and that things aren’t actually massively decentralised.

This last point is intriguing in that a lot of the software in this space is still relatively homogeneous and that if a network were to scale to become as distributed (or decentralized) as is hoped while simultaneously incorporating many nodes and clients, then it is likely that a diverse set (or lackthereof) of developer tools could prevent or perhaps even incentivize attacks (e.g., if every actor in the ecosystem uses the same client then that could create a vulnerability to the network).

In an exchange with Peter Todd, a contributor and developer on Bitcoin core and other related protocols (such as ClearingHouse), he framed the issue:

At the recent O’Reilly Media conference basically I pointed out that because this is an externality / tragedy-of-the-commons problem we may have to see Bitcoin fail due to a blocksize increase first before the community actually groks the issue. Personally I’m inclined to not oppose a blocksize increase on this grounds – Bitcoin failing cleanly is probably good for my interests.

In terms of “getting people on board” – to a degree you inherently can’t do this, because a blocksize increase will inherently exclude people from the system. See for example the discussion between Greg Maxwell and Gavin Andresen several weeks ago on the #bitcoin-dev IRC channel.

I spoke with Robert Sams, co-founder of a fintech startup who has previously written analysis covering the marginal costs of Bitcoin-like systems. In his view:

Levin’s point about network propagation is key: mining a larger block has a lower expected return because of the increased probability of losing out to a smaller block in an orphan race.

Now all of what you argue is a totally sound economic conjecture based on the assumption of distributed mining economics. Miners include tx until the marginal cost of tx inclusion (opportunity cost of including a different tx when up against the block limit + block propagation effect) equals marginal revenue (the fee).

However, for me the crucial economic force here is what happens to fees under concentrated mining. The logic changes from the marginal costs equals the marginal revenue logic in the above distributed case to a more strategic, oligopolistic pricing dynamic. What I mean is this. In the distributed case, whether or not a given miner includes a given tx has no material effect on the expected confirmation time for the tx sender. But in the concentrated mining scenario it does. If some pool is 35% of the network, the decision by that pool to not include the tx will materially increase the confirmation time of that transaction. So miners can extract more of the value that a tx senders place on fast confirmation times by setting their own minimum fee threshold, knowing that this threshold will over time effect the fees that tx senders include. What that optimal threshold is depends upon how much senders are willing to pay for faster tx confirmation times. Who knows what that is, but the implication is clear: under concentrated mining, fees levels will start to reflect more what tx senders are willing to pay rather than the cost to miners of including them.

So when you cast the blocksize issue in this concentrated mining context, it’s really not clear what will happen. My bets are that fees will go up and we won’t have to worry about blocksizes because higher fees will act as a break on adoption.

If block sizes are increased we will learn a lot about the dynamics of the community, the interplay between incentives such as fees and seigniorage have for on-boarding (and off-boarding) miners as well as how price sensitive users are in this space.

Ultimately it is the miners who decide as they are the entities creating Sybil protection and preventing double-spend attacks (or in some cases, providing that service). Or as Raffael Danielli, a quantitative research analyst at ING explained:

In theory, fee rewards should incentivize miners to include as many transactions as possible. In reality though fee rewards are a tiny percentage of block rewards and the risk-rewar

a new artwork

2015-11-02T12:23:51Z

*in progress*

I have had this model of a drone for a while now, an Italeri 1/72 RQ-1 Predator.

The final aim has been to mount it like the victorian collectors of insects, and start to present the machinic Phylum in this victorian, museum style.

I have finally put it into a frame.

From the collection. #themachinicphylum

A photo posted by @geocontrol on Feb 5, 2015 at 2:55am PST

and I expect to hang it on my wall shortly, i doubt it will be in a gallery near you anytime soon though.

Scribe-spotted

Sponsored: 64% off Code Black Drone with HD Camera

Keep it light

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Half-caste

Bank of England Chief Economist: Blockchain-based Digital Currency Issued by Central Banks Could Replace Cash

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A History of the Future, Now Free

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World Wide Web Creator Tim Berners-Lee Leads W3C to Establish Online Payment Standards Including Bitcoin

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A Quantum Theory of Money and Value

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You can’t rob a glass bank, even if you work for it

What is permissioned-on-permissionless?

The Sky

Machine Supply

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Machine Supply

What next?

Why, oh why, do so many librarians continue to chain themselves to the past??

Austerity: The LARP

More on conversational UIs

Political parties and organizational intelligence 2

Zen Mind Seeing Mind

Netflix Streaming - More Energy Efficient than Breathing

Netflix Streaming: Energy Consumption for 2014 was 0.0013 kWh per Streaming Hour Delivered

36% was from renewable sources

28% was offset with renewable energy credits

Carbon footprint of about 300g of CO2 per customer represents about 0.007% of the typical US household footprint of 43,000 kg (48 tons) of CO2 per year

AWS Footprint

ISPs

Consumer Premise Equipment

Comparisons

Human communication strategies.

Trigger Warning - Generation Hugbox

The Count

00:05

02:00

03:30

03:45

04:00

05:30

07:00

Mired in muck

Why opening up APIs is not just a developer priority, but a business one

British Pound counterfeit scheme busted, two arrested

Bankymoon Introduces Bitcoin Payments to Smart Meters for Power Grids

Teaching BASIC in 2015

From Coincidensity to Consilience

My first collection of stories!

Electoral Numbers

Crowdfunding the election campaign

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How to crowdfunding

What we did

GIVE US YOUR F**KING MONEY

Distributed Oversight: Custodians and Intermediaries

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Denial of service

Provision of service

Deploy the robots

Back to humanity

Wishlist

Shedding Light on the Slightly Strange: Lantern Slides from the Booth Museum Collections

Facebook Takes Over The World

What is the blockchain hard fork “missile crisis?”

a new artwork