Bitcoin’s ‘Segwit2x’ Scaling Proposal: Miners Offer Optimistic Outlook

  

"The number means something. Hash power means something."

As explained by Xiangfu Liu, co-founder of bitcoin mining chip maker Canaan, there are few things more sacred in bitcoin than the idea that the strength of a blockchain is the computing power dedicated to securing its ledger. But while bitcoin's miners remain united in this daily pursuit, their opinions on a new scaling proposal seem decidedly mixed. Known as 'Segwit2x', the proposal, spearheaded by bitcoin investment conglomerate Digital Currency Group, aims to move forward with two changes to the bitcoin network: an optimization called Segregated Witness (SegWit) and an increase to the hardcoded parameter limiting the size of its transaction blocks.

Notable about the effort is its claim it draws support from more than 80% of bitcoin's computing power. Mining industry participants including Bitcoin.com, Bitfury, Bitmain, BTCC, F2Pool and ViaBTC all signed an agreement supporting the solution, alongside roughly 50 industry startups. Such participation has done much to lend validation to the effort. That's because, due to how the network functions, miners (along with nodes) must upgrade to any new software – a position some have argued makes them voters in a kind of electoral process. Still, their motivations and exceptions appear varied.

Notable was a palpable fatigue in answering questions about protocol changes at all, a sign of the years-long debate that's split the industry. Wang Chun, owner of F2Pool, a signatory on the proposal which accounts for more than 7% of bitcoin's hashing power, suggested he wasn't supporting it from a position of enthusiasm.

Chun told CoinDesk:

"I keep away from the debating parties and do my own things. Let them keep debating."

Others broke along typical partisan lines.

Haipo Yang, founder and CEO of mining pool ViaBTC, which represents roughly 4% of the bitcoin network's hash power, for example, was in favor of the proposal. Long a proponent of boosting the block size to 2MB via a hard fork, Yang went so far as to state the mechanism could force those who disagree off the blockchain. "[A split] is a good thing in my opinion," he said, citing philosophical disagreements with bitcoin developers (who have largely been critical of the proposal).

Jack Liao, CEO of LightningAsic, a maker of bitcoin ATMs, miners and wallet hardware, agreed, but from the opposite angle. He cited past issues with alternative implementations of the bitcoin software as evidence that Bitcoin Core, the network's largely volunteer group of developers, is the "only good team" that could help steer and navigate such changes.

Startup role

Mixed feelings were also prevalent as bitcoin's startup community asserted itself in the technical conversation. Most past agreements, or attempts at agreements, have largely featured involvement from Bitcoin Core developers and China-based miners, as each group represents the largest bloc of constituents from the two parties most responsible for the network's daily functioning. But, Gadi Glikberg, owner of Connect BTC, a mining pool owned by hardware provider Bitmain, noted he believes startups play a key role as larger corporates have yet to become invested in the ecosystem.

"We don't have any real large enterprises yet. I think that in this example startups fill in that void and speak as an important actor in the ecosystem," he said. Others were open to the idea, but think this assertion creates a mixed context for discussion, because, from an academic perspective, it may not be clear which businesses are best suited for the use of a blockchain, a technology created by bitcoin and with little past precedent. "Philosophically, I'm not convinced bitcoin actually has a problem," said long-time bitcoin miner and GigaWatt founder Dave Carlson. "It just presents a problem for certain business models."

Carlson added, that as GigaWatt hosts miners on behalf of individuals who then elect mining pools, his firm believes in letting miners choose which solution to support. Others saw a similar conclusion putting pressure on the debate. "I think some companies can use the private blockchain for sure," Liu said. However, here he noted that the appeal of the hashing power securing the ledger makes the bitcoin blockchain quite valuable to startups.

Future outlook

Overall, though, remarks were positive about the deal, provided it could sidestep issues that have stymied by past disagreements. Of particular reference was the so-called 'Hong Kong Agreement', a meeting of developers and miners that also saw participation from 80% of bitcoin's mining power providers. That agreement called for the completion of SegWit and a hard fork in mid-2017, though it broke down as key deadlines were missed. "In China, there is always talk about the Hong Kong Agreement. So, as long as people follow the agreement, I think this is doable," Liu remarked.

Elsewhere, supporters noted that much is riding on the specific technology that will underlie the proposal and change the network rules. Currently, development is being overseen by bitcoin security startup BitGo, with help from other developers including Bloq co-founder Jeff Garzik. Startups including Bitcoin.com, Bitfury and Xapo have pledged technical assistance, though they have yet to provide details on what this would entail. Still, there was a sense that amid a booming market for cryptocurrencies, the ecosystem now has new resolve to make changes that boost both the perception of bitcoin and the scalability of its underlying technology.

"I think that the companies that committed to the agreement remain committed," Glikberg said, concluding:

"It is now time for the shared developer resources to come together and deliver the code that will get the ball rolling."

Chuck Reynolds
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Russia wants to build a better Bitcoin

Russia wants to build a better Bitcoin

The Central Bank of Russia has plans to introduce a national cryptocurrency of its design, according to Deputy Governor

   
Bitcoin breakthrough? Russia moots cryptocurrency green light

"Regulators of all countries have come to the conclusion that it is necessary to do a national virtual currency. This is the future. Each country will decide the issue of a specific time and maturity independently," said Skorobogatova, speaking at St. Petersburg International Economic Forum (SPIEF 2017).

Skorobogatova said testing of a national virtual currency has already taken place on the Masterchain and Hyperledger platforms. She added that the details of the project could be revealed in two to three years. While Russian officials have been divided on cryptocurrencies, the technology has been backed by the financial sector, most notably by Herman Gref the head of Russia’s largest lender Sberbank. During the Forum, First Deputy Chairman of the Bank of Russia Sergey Shvetsov also said that one of the Russian stock exchanges is planning to allow trading in virtual currencies.

“There is a discussion whether it is a commodity or not," he told RIA Novosti. Cryptocurrencies could be recognized in Russia by 2018, said Deputy Finance Minister Aleksey Moiseev in April. Although he expressed concern about the anonymity of transactions. “The state needs to know who at every moment of time stands on both sides of the financial chain,” Moiseev said in an interview, as cited by Bloomberg. “If there’s a transaction, the people who facilitate it should understand from whom they bought and to whom they were selling, just like with bank operations.”

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Walmart Wants to Track Delivery Drones With Blockchain Tech

Walmart Wants to Track Delivery Drones With Blockchain Tech

  

Retail giant Walmart is seeking to patent a system

that uses blockchain technology to track packages delivered by unmanned drones. The US Patent and Trademark Office (USPTO) published the application, innocuously titled "Unmanned Aerial Delivery to Secure Location", on 25th May, and while that title may not give away much of Walmart's plans, the application itself reveals further details. As outlined, the retailer is looking at blockchain tech as a way to track shipments that involve flying drones.

The patent application explains:

"In some embodiments, the delivery box may also include a delivery encryption system comprising a blockchain for package tracking and authentication. Package tracking by blockchain may include elements including but not limited to location, supply chain transition, authentication of the courier and customer, ambient temperature of the container, temperature of the product if available, acceptable thresholds for ambient temperature of the product, package contents placed in the container system (products & goods), or a combination thereof."

It's a notable release from the global retailer, which has revealed some of its work with blockchain in the past. For example, last October, Walmart announced that it was working with IBM to develop a supply chain solution focused on China’s pork market, the largest in the world.

At the time, the retailer indicated that it was looking to apply the tech to other supply chains. And while it provided no hint that it was looking at blockchain as an underlying mechanism for aerial drones, Walmart told CoinDesk that it wanted to leverage blockchain to facilitate "fresher and faster deliveries". The application also details how the tech could be used to establish identity within the package system. "Authentication and access may be restricted to specific blockchain keys to access the contents of a parcel's payload, and may include specific times and locations," the authors write. "Access to the contents may be determined at the scheduling and purchase of a delivery or products."

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How the blockchain could fight grid cyber-threats

How the blockchain could fight grid cyber-threats

  

The recent ransomware saga is a potent reminder

of just how vulnerable our information and data is to cyber-threats. But it’s not just our information that’s vulnerable; these threats extend into the physical world of electricity as well. In fact, today’s electrical grid is incredibly insecure against cybersecurity threats; for example, the massive 2015 cyberattack on the Ukranian power grid that left 230,000 people in the dark and the intrinsic level of insecurity presented by smart meters used all over the world. And with billions of energy-using, Internet-connected devices expected to come online over the next decade (PDF), the grid is about to experience a several-orders-of-magnitude increase in the number of vulnerabilities to

cyber-threats.

As … billions of energy-using devices are integrated into the electricity system, malicious actors will see the potential to exploit these systems and attempt to usurp this new reality.

Fortunately, blockchain technology is inherently robust against cyber-threats, and many energy companies are considering how blockchains may bolster the grid’s cybersecurity. This is because blockchains are built for:

  • Tamperproofing data (PDF): 
    Blockchains make it very difficult to change data after it has been written. This eliminates a number of risks, including man-in-the-middle attacks, in which a hacker modifies data that’s en route to its destination. With a proper blockchain implementation, all computation is "hashed" and made tamperproof at the point of origin, so there is no risk of data being modified while in transit.
  • Disintermediation (PDF): 
    With blockchains, intermediaries (escrow corporations) often are no longer necessary, significantly reducing transaction costs.
  • Complete data availability (PDF): 
    Blockchains can store data in a decentralized fashion across many nodes. With this architecture, even if some nodes or servers are compromised, users still can access a complete dataset.
  • Redundancy (PDF): 
    Blockchains operate without a central point of failure, so reliability through redundancy is intrinsic to this architecture.
  • Privacy and control: 
    Users of a blockchain can choose which data to make immutably transparent and which data to keep encrypted so only the intended recipients can view the contents.
  • Outsourcing computation (PDF): 
    Encrypted data can be sent for processing to a third party, without the contents of the data being revealed.

As the world of energy becomes more digitized and decentralized, the need for solid defense against cybersecurity threats increases drastically. When a blockchain is implemented properly, it offers a strong defense against external and internal threats by mitigating internet-connected and data communications vulnerabilities, and increasing data confidentiality and privacy.

Mitigating vulnerabilities

Internet-connected energy-using devices have the most room for improvement when it comes to cybersecurity. Between January and April, the research found that over 2 million Internet of Things (IoT) devices in homes were hacked into and rendered useless (bricked). This attack was to protest manufacturers’ poor cybersecurity policies for the devices, chiefly, thousands of devices set by default to use basic login and authentication credentials (username=user and password=password). In this case, hackers could have been much more malicious than simply bricking devices, but they wanted to prove their point: Unsecured IoT devices are unsafe, and should not be allowed to operate in a real-world environment where people’s lives and property are at risk.

Blockchain technology and those working on making it more usable for everyone are paving the way toward a new user-authentication paradigm. The current system of username/password combinations has been obsolete for many years. A much more secure mode of authentication is that of the public–private key pair (also called public key cryptography), the default in systems such as Bitcoin and Ethereum. As these blockchain implementations become more user-friendly, we will see a natural evolution of all login systems toward this more modern and secure method.

With a properly integrated cryptographic key login system for blockchain-based applications, IoT device owners will bear a significantly reduced risk of loss of power, theft of data and threats to privacy. What's more, integrating pricing and settlement on wholesale electricity markets into a secure blockchain significantly minimizes the risk of false data injection and pricing manipulation. This is largely because of the tamperproof characteristic of blockchains, which ensures immutability of a given dataset or series of communications between transacting parties.

The blockchain is also relevant for addressing data privacy and security issues. As more data is collected and transported over the internet, the risk of data exploitation and breach increases, as evidenced by the release of confidential information from hacks of LinkedIn, Yahoo, Target and other large organizations. Blockchains allow for the encrypted transportation of private data, ensuring that data is readable only by the intended recipient.

Introducing a new risk: Key mismanagement

Blockchains are great at mitigating several cybersecurity risks, but they also introduce a new risk that is often overlooked: key mismanagement. Key management is the secure storage of digital keys in a fashion that prevents unauthorized access — something of significance for distributed energy resources, which eventually will be connected to the web and authenticated mostly through asymmetric cryptography (the method used for all blockchain-based transaction and authentication). Many early adopters of blockchain technology that don’t have a background in IT have lost their private keys, rendering their blockchain assets or devices inaccessible.

However, key management is getting some much-needed attention, and innovators are creating new ways to store and recover private keys securely. One innovative way to tackle this problem is to integrate key pairs in actual, physical devices (think key fobs for your car) and use them to activate devices. This minimizes, or in some implementations renders impossible, the risk of hackers accessing private keys that confirm the identity and authority of a signing entity. Keys that exist on a personal device enforce secure signing on, for example, an energy-using internet-connected device (an electric vehicle). For a malicious actor, if all signing must be on a device, then the physical device must be compromised in a way that allows a hacker to remotely execute commands on the device instead of just reading data, which is much more difficult for the hacker and therefore a more secure implementation.

As digitized and distributed systems in energy become more common and billions of energy-using devices are integrated into the electricity system, malicious actors will see the potential to exploit these systems and attempt to usurp this new reality. Therefore, it is paramount that we ditch the "build-then-patch" approach, and build systems integrated with holistic security. Fortunately, much of this security is inherent in a properly implemented blockchain.

Chuck Reynolds
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Russia’s Vnesheconombank Reveals Blockchain Product Strategy

  

A state-owned development bank in Russia

has revealed its plans for launching products built around blockchain. Vnesheconombank, an institution backed by the Russian government, is focusing its efforts on the areas of project management and supply chain finance, according to a report by Sputnik International. The publication quoted Vnesheconombank's chairman, Sergey Gorkov, who appeared this week at the St Petersburg International Economic Forum.

What they're doing: 
Gorkov's comments, as quoted, reveal a kind of two-prong approach: developing institutional knowledge and pursuing applications – trade finance in particular – that have captured the attention of a wide range of financial firms worldwide.

Here's how Gorkov framed the bank's project management initiative, according to Sputnik:

"When we started to think about how to manage projects efficiently, we realized that there is no platform. Everything that we had became obsolete. We realized that the blockchain is a good fundamental and qualitative platform for the future."

He said that the bank had since pursued a pilot project centered around the use case, with further iterations to follow. "We are launching the first prototype in terms of project management this fall," he told the publication.

Why it matters: 
That a state-backed bank in Russia is moving to launch services around the tech is a notable one – but perhaps not an altogether surprising one given the pace of blockchain development in the country's finance sector.

The unveiling comes months after Russia's prime minister, Dmitry Medvedev, called for more research into the tech by a pair of government agencies. Government officials also said earlier this year that they expect to develop blockchain-specific regulations, looking to an introduction by 2019. That work comes as Russia's central bank drafts new rules around bitcoin and digital currencies, with an eye to regulate them as kinds of digital goods.

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Blockchain consortium R3 raises $107 million

Blockchain consortium R3 raises
$107 million

  

People may well remember 2017 as the year that blockchain broke.

After years of development and flickering just outside of mainstream consciousness and acceptance, record high prices for the most popular blockchain-based cryptocurrencies Bitcoin and newcomer Ethereum and an embrace of the technology’s core principles by some of the world’s largest institutions may mean that blockchain technology is ready for its close up. Nothing illustrates this more clearly than the just-announced $107 million financing for R3, the blockchain consortium that includes some of the largest financial services firms and technology companies in the world.

Leading investors included SBI Group, Bank of America Merrill Lynch, HSBC, Intel and Temasek, the company said in a statement. R3 represents the largest consortium of global financial institutions working on developing commercial applications for the distributed ledger technology that’s at the heart of blockchain technology. In addition to the big names that committed the most capital, R3 pulled in additional commitments from ING, Banco Bradesco, Itaü Unibanco, Natixis, Barclays, UBS and Wells Fargo.

R3, which opened the first tranches of the company’s planned $200 million financing exclusively to members of the consortium, is one standard-bearer for the mainstreaming of blockchain technology. Indeed, the company already counts among its customers the government of Singapore, the Bank of Canada and other national financial institutions. The company said it will use the funds to accelerate technology development and grow strategic partnerships for project deployment. R3 has its own proprietary ledger that can be used to develop applications, and it also supports an infrastructure network for financial services firms and technology companies to build their own ledger-based applications and services.

“While still in its infancy stages, the emergence of distributed ledger technology comes at a time when the financial services industry is poised to further embrace technological change and efficiencies,” said C. Thomas Richardson, the managing director and head of market structure and electronic trading services at Wells Fargo Securities, in a statement.  That sentiment was echoed by other financial services executives whose firms were members of the R3 consortium. “Innovation in digital technologies is reshaping the banking industry, and this investment is reflective of our belief that distributed ledger technology and smart contracts have the potential to significantly enhance capital markets infrastructure. R3’s collaborative approach is key to the progress of this technology,” said Andrew Challis, managing director of strategic investments at Barclays.

Not all big banks and financial services firms have embraced R3. Goldman Sachs and Santander both dropped out of the consortium, perhaps figuring they’d be better off going their own way. Where R3 has really shined has been in getting governments comfortable blockchain-based applications. Their approach of enlisting banks and financial services companies for projects is light years from the more subversive mindset of some of the developers of the original and the largest blockchain protocol, Bitcoin.

As some investors and entrepreneurs see it, there’s room in the market for both the private blockchains developed by communities around Bitcoin and Ethereum, and the sanctioned corporate ledgers that companies like R3 are developing. For now, the technology that R3 is developing is focused on business applications like verifying transactions between banks, or automating the things like the establishment of the London Interbank Offer Rates. In the future, the company’s technologies could touch consumers more directly — through the creation of a digital fiat currency. While that may be somewhere far off down the horizon, with the company’s connections to the banking industry and to national governments, it’s not beyond the pale.

Chuck Reynolds
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Eight Reasons To Be Skeptical About Blockchain

Eight Reasons To Be Skeptical About Blockchain

Given the turbulent, even frothy environment for disruptive digital technologies, one novel entrant promises to be among the frothiest: blockchain. The secure distributed ledger technology behind Bitcoin, blockchain has exploded out of the realm of the dubious cryptocurrency into a hype-driven category of its own. VC money is pouring into numerous blockchain startups. IBM IBM +0.59% is betting the farm on the technology. Pundits around the globe are calling for blockchain to reinvent everything from equities trading to charitable giving. And yet, aside from Bitcoin itself, real-world implementations of blockchain are few and far between. Has the hype exceeded the reality?

Let’s see what a number of skeptics have to say.
 

  

Secure ledger from an earlier century

Blockchain is a Solution Looking for a Problem

As blockchain exploded from its cryptocurrency roots, it quickly took on new life, as proponents rushed to figure out what else it was good for. “‘Blockchain is a solution looking for a problem’ is a sentiment that we heard several times while conducting this research—a fair representation of the reality,” says Axel Pierron, founder and managing director of financial consulting firm Optimas LLC. “Rather than investing in ‘catch all’ blockchain-related initiatives, the industry should focus its attention on evaluating the various solutions that can address the issues that need to be solved.”

The Open Data Institute also warns about selecting the ‘right tool for the job.’ “We think that the government should go further and think about how it can convene sectors (such as finance, agriculture, or health care), identify common challenges in those sectors and then determine which technology approaches – whether blockchains or not – are the most appropriate in helping to address them,” the ODI blogs. “Blockchain technology is a new tool in our toolbox. We need to use it when it is the right tool for the job at hand.” (Emphasis in both paragraphs is theirs.)

End-Users Don’t Really Want to Use Blockchain

It’s difficult enough to use Bitcoin for any day-to-day task, let alone blockchain. “But still, eight years after Bitcoin launched, Satoshi Nakamoto remains the only creator to have built a blockchain that an appreciable number of ordinary people actually want to use,” opines software engineer Jon Evans, principal at HappyFunCorp and columnist for TechCrunch. “No other blockchain-based software initiative seems to be at any real risk of hockey-sticking into general recognition, much less general usage.”

Perhaps a proof of concept would help? Blockchain aficionados have implemented an online trading card game they call the Rare Pepe Game to explore the potential of the technology. Even this simple example, however, proves wanting. “[The Rare Pepe Game] also shows how a game can be built on a blockchain with virtual goods and characters and more,” explains Fred Wilson, managing partner at Union Square Ventures. “And it shows how clunky this stuff is for the average person to use. Just playing around with this over the last few days showcases to me all of the technical challenges that blockchain technology still has to overcome before it can become mainstream.”

Blockchain Will Increase Transaction Costs

By disintermediating financial institutions, so the reasoning goes, multiple parties can conduct transactions seamlessly, without paying a commission. However, cost savings are dubious. “Moving cash equity markets to a blockchain infrastructure would drive a significant increase of the overall transaction cost,” Pierron continues. “Trading on a blockchain system would also be slower than traders would tolerate, and mistakes might be irreversible, potentially bringing huge losses.”

Unlikelihood of Sufficient Adoption

The promise of blockchain in large part depends upon enough parties using the same implementation of the technology – a classic example of the network effect. However, it’s unclear any particular blockchain solution (other than Bitcoin itself) will ever be able to reach this threshold. Without such universal adoption, blockchain’s practicality is questionable. “It’s obvious that a credit union-only distributed ledger system will require universal adoption to be of any use,” says John San Filippo, cofounder and principal at OmniChannel Communications. “It’s my experience that trying to achieve universal adoption of anything in this industry is an act of pure futility.”

Blockchain is Too Complicated

The technology behind blockchain is complex enough. Add it to the complexity of a heavily regulated business environment, and blockchain may not even get out of the gate. “Blockchain is thus also turning out to be more complicated than most of us thought,” warns Kris Henley, communications manager with the Centre for the Digital Economy at the University of Surrey. “Its tremendous potential is mitigated by its steadfast resistance to being a ‘magic’ solution, and its need for regulation like so many game-changing technologies of the Digital Economy.” Optimas’ Pierron chimes in as well. “Processing trades via blockchain would not simplify the capital markets, but rather move the complexity around,” he adds.

Performance Issues

Because of its inherently distributed, peer-to-peer nature, blockchain-based transactions can only complete when all parties update their respective ledgers – a process that might take hours. As ledgers grow, furthermore, people question whether they will bog down. “Blockchain has a lot to prove in its performance,” says Peter Hiom, deputy CEO at the ASX trading exchange. The transaction delay may also be a deal-killer. “The delay before the final assurance that a transaction has been recorded ‘for good,’ that can be up to a couple of hours, would create too much uncertainty for market participants, especially during time of high volatility,” continues Pierron.

Blockchain Ledgers’ Immutability Isn’t Always a Good Thing

One of blockchain’s most touted benefits is the immutability of its ledgers: once participants record a transaction, no one can change or delete it. Such immutability prevents the correction of mistakes to be sure – but there are other issues as well. In fact, immutability may cause blockchain to run afoul of regulation. “Digital ledger technologies must be chosen based on user needs and legal requirements,” writes the Open Data Institute. “For example; tamper-proof and immutable data stores prevent the modification of stored data, but this may not always be an acceptable property. The EU ‘right to be forgotten’ requires the complete removal of information; if that data is in an unchangeable system like a blockchain, this could be impossible.”

Blockchain is a ‘Trojan Horse,’
Sent by Radical Libertarians to Undermine the Global Financial System

Take this one with a large grain of salt to be sure – but at least one Bitcoin entrepreneur has stated this position. “I have no problem with the financial industry inviting the Trojan Horse of blockchain technology into their walled garden because I know how powerful the technology is,” says Erik Voorhees, CEO, and founder of cryptocurrency startup ShapeShift.io. I’ve warned about the Libertarian context for Bitcoin before, but if any members of this devoted but misguided group believe that blockchain alone will disrupt the financial industry, they are out of touch with how cautious the industry is.

In fact, the more likely blockchain is to disrupt the global financial system, the less likely it is to succeed. For disruption to be a positive business force, it must drive new competitive advantage, not simple chaos. Blockchain may be disruptive, but it’s still an open question whether it’s too disruptive for its own good. Intellyx publishes the Agile Digital Transformation Roadmap poster, advises companies on their digital transformation initiatives, and helps vendors communicate their agility stories. As of the time of writing, none of the organizations mentioned in this article are Intellyx

Chuck Reynolds
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Alan Zibluk Market Hive Founding Member

From bitcoin to blockchain: How the new ledger tech can morph the mortgage industry

From bitcoin to blockchain:
How the new ledger tech can morph the mortgage industry

Blockchain offers advantages to industry, including document security
and security breach protection

Bitcoin,
that is what most people think of when they hear the term blockchain.

However, blockchain has morphed into an incredible technology tool that can be utilized across industries in a variety of capacities, including in mortgage lending. The blockchain is a ledger system stored on a decentralized database which can consist of one or multiple owners across many computers or “nodes” linked together.  Records are linked in the form of time-stamped blocks.  It was originally utilized in the technology used by bitcoin – the electronic cash system. When the open source code for Bitcoin was released in January 2009, the technology of blockchain was brought forth.

This technology allows for documents to be stored and transferred in a process that cannot be altered or tampered with, enables validation and is less error-prone than current processes. The decentralized nature of blockchain can result in increased productivity since multiple parties can access the network and are able to work on files simultaneously.    

WHAT DOES BLOCKCHAIN HAVE TO OFFER? 

Blockchain promises many advantages; two of the most important ones are cyber breach protection and document security, both critical to the mortgage process. For mortgage lending, this could mean saving millions of dollars.  First, in addition to a more streamlined and technology workflow, there could be a reduction in the cost of using third-party vendors due to automation.  Second, blockchain allows for transparency in the storage of data.  Entries on a blockchain ledger become time-stamped blocks which mean that there cannot be hidden alterations to the chain. By using blockchain for document management, such immutable data could help in regulatory compliance tracking and ultimately in customer confidence because of the transparency of such data.                  

Another benefit to using blockchain is the characteristic of document authentication which confirms that data is placed upon the network belongs there.  When data is placed on the network, the document blocks are coded with specific hash sequences which must match the specific hash sequence of the network.  If the sequence does not match, the data will not be saved onto the blockchain. Blockchain technology is highly versatile and can be applied to many industries, including those that utilize payment and money transfers, stock trading, voting capabilities and reliance on secure storage of data.  Such industries include law, healthcare, insurance, car leasing and sales, online music, stock trading, supply chain management, storage and, of course, mortgage lending.

THE DOWNSIDE TO BLOCKCHAIN 

While blockchain offers many advantages, there are a few factors that need to be considered, including the “51% attack,” energy consumption of the networks and regulatory oversight. The proposition that blockchain offers a secure network relies on the principal that the network cannot be tampered with by cyber criminals unless they have the energy resources to hack into a majority, or 51%, of the computers on the network to gain control of the blockchain.

Thus data and records that are stored on each computer that has access to a particular blockchain would not be very valuable to a cyber thief. While an attack on a full network of computer nodes is unlikely, private blockchains have an added layer of security by requiring credentials and permissions to gain access to nodes.  Should a cyber attacker have the computing power and time to gain control of the nodes, these permissions and credentials further the difficulty needed to enter the network and manipulate the blockchain.

In a 51% attack, the majority of the computing power on the network is attacked and hackers are able to interfere with the process of recording new blocks. The interference prevents other users of the blockchain from completing new blocks, allowing these cyber attackers to monopolize the input of data on the blockchain.  While this type of attack could be devastating, the amount of computing power a hacker would need to possess in order to launch an attack on a blockchain is massive.

With regard to energy consumption, the distributed nature of the network calls for continued power in the multiple locations housing the nodes.  According to environmental researcher Sebastiaan Deetman, the blockchain network that bitcoin is housed upon is expected to consume energy somewhere between an amount equal to the output of a small power plant and the consumption of a small country such as Denmark by the year 2020.  Deetman’s study further cites that the bitcoin network currently consumes enough electricity to power 280,000 homes in America.

Given that blockchain is an emerging technology, there are not yet formal regulations pertaining to it, however, there is guidance that addresses its characteristics, such as privacy and security, as well as governance of its use and implementation. U.S. regulators, including the Securities and Exchange Commission and the Treasury Department, have indicated that there are risks and uncertainties, such as cyber security and regulatory oversight associated with blockchain which will need to be monitored.  The Treasury Department’s Financial Crimes Enforcement Network issued a guidance in 2013 that discusses the applicability of the Bank Secrecy Act regulations to blockchain and individuals distributing, exchanging or transmitting virtual currency.  While the Consumer Finance Protection Bureau has not yet made a statement about the use of blockchain, it has issued warnings to consumers regarding risks associated with bitcoin.

Transaction processing time is also a concern among those developing blockchain networks.  Currently, the size of a block is one megabyte and the blocks are mined every 10 minutes.  With the limited size of the blocks and mining time of 10 minutes, this means that only about seven transactions per second can be recorded.  The limited number of transactions may be a barrier to entry for the blockchain network in the mortgage industry;  however, as the technology advances, blocks with larger storage capacity and increased computing power in mining blocks should make blockchain a more attractive option for the industry.

Chuck Reynolds
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Blockchain Companies Achieve Mainstream Recognition, Declared “Cool Vendors”

Blockchain Companies Achieve Mainstream Recognition, Declared
“Cool Vendors”

  

Most recognitions of Blockchain-based achievements

revolve around the immediate ecosystem. Awards, competitions and major breakthroughs have so far been celebrated predominantly within the Blockchain community. Being recognized by conventional mainstream institutions might indeed be a huge statement as far as Blockchain development is concerned

Synereo and others

Gartner is a US-based research and advisory company. Recently, it shortlisted a number of Blockchain solution providers as “Cool Vendors in Blockchain Applications.” Synereo, one of the shortlisted companies, is recognized for its mission especially as it concerns its upcoming product Qrator, as well as its potential for the complete disruption of the content and distribution economy. A key attraction is the benefits of granting creators, curators and consumers ownership of their data, creations and communication channels while offering novel ways to monetize intellectual property, unbound by central entities.

Other Blockchain companies shortlisted by Gartner are Factom, OpenBazaar, SmartContract and Gnosis.

With this kind of recognition, it is evident that Blockchain is making inroads in the conventional technological environment making mainstream adoption only a matter of time. Anari Sengbe, the creator of oWo, which claims to be the first sentient cryptocurrency, tells Cointelegraph that having weathered tons of bad news and negative media, Blockchain has come out shining and smelling like roses. Sengbe thinks that it is high time that wider society begins to appreciate the works going on within the ecosystem. He also notes that these recognitions will eventually have a positive impact on mainstream Blockchain adoption.

Sengbe says:

“Exceptional recognitions will finally start getting the heavy decision makers on board in terms of governments who can no longer be closed from the societal potential of the Blockchain that's yet to come.”

Chuck Reynolds
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Spanish Banks Back ‘Red Lyra’ Blockchain Consortium

  

Have formed a new Blockchain Consortium.

It's the second group effort launched in Spain in recent days, though some of the new members, which include law firms and utilities, signify a wider scope than one that is purely financial. The newly minted consortium members are Banco Sabadell, Banco Santander, Bankia, BBVA, BME, Caja Rural, Cajamar, Cepsa, Correos, Ejaso, Endesa, Everis, Garrigues, Gas Natural Fenosa, Grant Thornton, Iberdrola, Icade, MásMóvil, Momopocket, Notarnet, Roca Junyent and Scytl.

What they're doing: 
According to releases from some of those involved, the consortium is tackling a "multi-sector" strategy in the kinds of projects they focus on.

As explained BBVA, the first major undertaking will be centered around digital identity, with the bank saying:

"The first project of the Lyra Network will focus on the development of a digital identification system that can be safely shared and comply with the requirements of Spanish regulation by all members of the network. Lyra will develop legal identification services or support contracts ( smart contracts ), hence it is particularly important that its founders include recognized law firms and legal experts."

Why it matters:

The news is the latest indication that Spain's business sector is throwing its weight behind the technology. Just last week, a group of regional Spanish banks launched a collaborative effort around blockchain, and while it’s not quite which kind of products or services they might develop in tandem, Cecabank's comments about "in-depth understanding" suggest that, at the very least, they’re trying to learn more. Indeed, some of those members – including Bankia and professional services firm Grant Thornton – are part of the new Red Lyra project as well.

Chuck Reynolds
Contributor
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Alan Zibluk Market Hive Founding Member

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