5 min read

Top 10 Things To Know About Blockchain This Week

Simon Taylor

Some thoughts crossing the mind of our own Simon Taylor; that if you’re interested in the subject of Blockchain you might want to consider:

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1) In case you missed it, Bitfinex a Bitcoin exchange was hacked to the tune of $72M USD

Representing nearly 1% of all Bitcoins in circulation and crashing the Bitcoin price by 20%. This after months of stability in Bitcoin price and many suggesting it had found its true value and shrugged off years of volatility. Bitfinex, unlike Mt Gox or many before it, used the much talked about “Multi Sig” security option (where an independent third party signs all of their transactions to make hacking them harder”. Despite this it appears…
  • Bitcoin hackers are becoming more sophisticated
  • Exchanges and the Bitcoin community may move away from this “theft is a tax on stupidity” and start moving towards security
  • This resembles the Target and Sony hacks much more than the Mt Gox hack in my view. Bitcoin exchanges are coming of age and now subject to the same threats as the rest of wider FS industry.
Lesson: Good cyber security hygiene is something we all need, and multi sig isn’t a solve all, neither is cold storage. Risk management is needed at some level. Note, it’s rarely the Bitcoin code base that’s at fault here, but rather how someone has built solutions on that code base…

2) The Eth Fork / DAO fall out continues to create waves.

Whilst I’ve seen some statistics that the combined ETC / ETH market cap is now actually higher than ETH was pre-fork, this appears to be Bitcoin old money moving into ETC for ideological reasons. Coindesk did a really good summary of events HERE if you want a refresher Lessons:
  • The Eth community has chosen protecting against fraud over “code is law”, this is a sign of maturity in that community in my view, but many Bitcoin libertarians really don’t like it.
  • “Two versions of truth” has meant that someone can watch what happens in ETH, then “replay” using the same keys that signed a transaction in ETC an entirely new transaction that moves money in a slightly different way. This “chain arbitrage” is a gaping hole. The permissionless blockchain space is still like the wild west.

3) Central Bank Digital Currencies aren’t a bad idea…

They’re just not fully fleshed out as an idea. The Bitcoin community is attacking this because it’s not “pure”. The economists are attacking it because it’s more neo classic liberal policy. Governments, central banks and commercial banks though are taking the idea very seriously. We just need something that is more pragmatic in the short term…

4) The subject of interoperability is becoming more important

As it becomes clear there will not be “one chain to rule them all” and in the darkness bind them. However, there are now nearly as many proposals for how interoperability should work as there are blockchains. What’s more almost nobody is thinking about integration and backward compatibility with old systems. Lesson: It’s worth watching projects like Interledger, Rubix, Liquid by Blockstream, Tendermint, BTC Relay and others closely. It’s also something I suspect Hyperledger and Corda will start to address in time.

5) Your opinion on the subjects of Privacy and Confidentiality will dramatically alter how you view the “Blockchain” and shared ledger space.

True confidentiality in a public, permissionless blockchain is still the work of conceptual computer science and is not practical at this stage. For companies that rely on that to operate, it shouldn’t surprise that they would not opt for a public permissionless blockchain design currently

6) If you ask 10 different people what a blockchain is, you will still get 10 different answers.

In my view it’s a collection of technologies and ideas and more of a marketing term these days. It could mean anything from a database with many (often competitive) administrators and eventual consistency, or it could mean smart contracts on top of a more classic database structure. Or it could mean Bitcoin. Or some mix of all of those!

7) Some will try to convince you that any kind of “permissioned” blockchain is a “scam”

But my experience is these people neither understand the issues facing large organisations nor are they sympathetic to them. There is a view that permeates software development in open source blockchain projects especially that is “because we write code, we understand everything”. This is not true, but I find the BEST software developers truly do try to understand everything.

8) Despite point 7, There’s still a whole heap of basics most companies could get right with today’s technology.

Getting basic APIs and DevOps in place is a huge task for incumbent corporates and trying to do it, and doing it well are two very different things,

9) Smart Contracts where “Code is Law” and Smart Contracts that are comprised of “legal code” and “computer code” are two very different ideas.

Understanding the difference is key to understanding how your company might want to use the concept of a smart contract. This by Dr Braine and Dr Clack is a good starting point.

10) Blockchain is in it’s gawdy teenage phase.

It’s gone a bit goth, it’s slamming the door, it’s having all kinds of drama but it’s also learning a tremendous amount. It’s inching toward maturity with real world pilots and implementations. As always if you want more news, views and opinion on how Blockchain will shape the future of your business, you can find me at Simon@11fs.co.uk[/vc_column_text][/vc_column][/vc_row]

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 Simon Taylor
About the author

Simon Taylor

Simon leads client engagements for 11:FS , building teams and delivering new products and services to market. He is an expert at making the fintech approach work inside a large banking environment.

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