Why blockchain detractors are missing the point
And so it goes on. From popular posts to contemptuous tweets to predictions about the future, the world and its mother are lining up to throw tomatoes at private blockchains, before even understanding what they are.
Saying that a private blockchain is just a shared database is like saying that HTML and HTTP are “just” distributed hypertext. It’s wrong in two ways. First, the semantic one: private blockchains are a technology that enables shared databases, like pens enable writing and HTML/HTTP enable distributed hypertext. The bitcoin blockchain and its primary application cannot be meaningfully separated, because one could not exist without the other. But this equivalence does not apply to private blockchains at all.
The second mistake is the use of the word “just”. Just? Were HTML and HTTP just a way to do distributed hypertext? Hypertext was invented decades earlier, so are these technologies a minor footnote in computer history? Oh but let me count the ways in which they earned their place: (a) a simple markup language that any layperson could learn, (b) a hierarchical addressing scheme that works both with TCP/IP and our conceptual model of place, (c) a simple protocol for the state-free retrieval of content, and (d) both client and server software that brought the whole thing to life. We might as well say that Newton was just a scientist and Dostoyevsky just a writer.
So let’s make this perfectly clear: Yes, private blockchains are just a way to share a database. But they enable a new type of shared database, with huge implications for the financial world and beyond. And if you’re willing to read on, I’m going to tell you exactly why.
What is a database?
A database is a repository of structured information, organized into tables. You can think of it as a collection of one or more Excel spreadsheets, which can optionally be linked together. Each table contains information about a set of entities of a particular type, with one entity per row. Each table also has one or more columns, which describe different aspects of those entities. For example, the table for WidgetCo’s internal staff directory might have columns for employee ID, first name, last name, department, internal phone number and room number.
One of the important ways in which databases go beyond spreadsheets is that they contain rules about the data stored within. These rules help ensure that the information remains sane and consistent for the benefit of the entire organization. In today’s most popular databases, the rules take a number of common forms:
- The database schema defines what kind of information is permitted in each column. For example, the phone number must contain 4 digits and cannot be left blank (“null”).
- Unique keys which state that a particular column (e.g. employee ID) must have a different value in every row.
- Check constraints which enforce relationships between the column values in each row. For example, if the department is “Procurement” then the room number must start with a 3 or 4.
- Foreign keys which enforce relationships between tables. For example, if the database contains another table used for payroll, there might be a rule that every employee ID in the payroll table must also exist in the staff directory.
A transaction is a collection of changes to a database that is accepted or rejected as a whole. Every time a transaction modifies the database, the software ensures that the database’s rules are followed. If any part of a transaction violates one of these rules, the entire transaction will be rejected with a corresponding error.
There are other more esoteric rule types I could list, but they all have one thing in common. They answer the question: Is the database in a valid state? In other words, they act as a constraint on the database’s contents when viewed at a single point in time. And this works just fine for a database which sits inside a single organization, because the main job of the constraints is to prevent programmer error. If one of WidgetCo’s internal applications tried to insert a 3-digit phone number into the directory, this wouldn’t be due to malice, but rather a bug in the developer’s thinking or code. The ability of a database to catch these mistakes is undoubtedly handy, and helps prevent bad information propagating within an organization, but it doesn’t fix problems of trust. (Constraints can also help simplify application logic, for example via foreign key cascading or on-duplicate clauses, but these are still just ways to help developers.)
Now let’s think about how WidgetCo’s internal staff directory might be shared with the outside world. In many cases, there is no problem providing shared read access. The directory can be exported to a text file and emailed to customers and suppliers. It can be posted on the Internet, just like this one. It can even be given an API to allow searching by external code. Shared read is a technical doddle, a question of deciding who can see what.
But things start getting stickier when we think about shared write. What if WidgetCo wants an external entity to modify its database? Perhaps the phones are being replaced by PhoneCo, who will then update the phone numbers in the staff directory. In this case, WidgetCo would create a new “account” for PhoneCo to use. Unlike accounts for WidgetCo’s internal use, PhoneCo’s account is only permitted to change the phone number column, and never add or delete rows. All of PhoneCo’s transactions are processed by WidgetCo’s database system, which now applies two types of restriction:
- Global rules which apply to all database users. For example, the phone company can’t change a number to contain only 3 digits, and neither can anybody else.
- Per-account rules restricting what PhoneCo is permitted to do, in this case only modifying the phone number column of existing rows.
So far, so good. We have a shared write database. It works because WidgetCo is in charge of the database and the phone company gains access by virtue of WidgetCo’s good grace. If PhoneCo started setting phone numbers randomly, WidgetCo can shut down their access, terminate their contract, and restore some old data from a backup. And if WidgetCo started misbehaving, say by reversing the new phone numbers entered by PhoneCo, well that would be entirely pointless, since it would only harm WidgetCo themselves. The phone company would consider WidgetCo to be a peculiar customer but not particularly care, so long as they paid their bill on time.
But now let’s see what happens if two or more parties want to share a database which (a) none of the parties controls, (b) can be written to by any party, and (c) can be relied upon by everyone. To make things worse, let’s say that these parties have different incentives, don’t trust each other and may even be fierce competitors. In this case, the solution has always been the same: introduce a trusted intermediary. This intermediary manages a database centrally, provides accounts to all of the parties, and ensures that all operations are permitted according to a known set of rules. In many cases, especially financial, every party still maintains its own copy of the data, so everyone spends a lot of time checking that their databases agree.
It all gets rather messy and cumbersome. But if we’re talking about a shared write database in an environment of limited trust, there is currently no alternative. That’s one of the main reasons why financial transactions go through central clearing houses, why you use Google Calendar even in a small workgroup, and why the crowd-sourced wonder that is Wikipedia spends millions of dollars on hosting. Even as the user interface of the web moves to the client side, centralized servers continue to store the data on which those interfaces rely.
Real shared write
So let’s say that we wanted to allow a database to be shared, in a write sense, without a central authority. For example, several competing companies want to maintain a joint staff directory for the benefit of their mutual customers. What might that actually look like? Well, it would need a number of things:
- A robust peer-to-peer network that allows transactions to be created by any party and propagated quickly to all connected nodes.
- A way to identify conflicts between transactions and resolve them automatically.
- A synchronization technology that ensures all peers converge on an identical copy of the database.
- A method for tagging different pieces of information as belonging to different participants, and enforcing this form of data ownership without a central authority.
- A paradigm for expressing restrictions on which operations are permitted, e.g. to prevent one company from inflating the directory with fictitious entries.
Whew. That’s a tough list right there, and it’s simply not supported by today’s off-the-shelf databases. Current peer-to-peer replication technology is clumsy and has a complex approach to conflict resolution. Those databases that do support row-based security still require a central authority to enforce it. And standard database-level restrictions like unique keys and check constraints cannot protect a database against malicious modifications. The bottom line is this:
We need a whole bunch of new stuff for shared write databases to work, and it just so happens that blockchains provide them.
I won’t go into too much detail about how blockchains do these things, because I’ve covered much of it before. Some key elements include regular peer-to-peer techniques, grouping transactions into blocks, one-way cryptographic hash functions, a multi-party consensus algorithm, distributed multiversion concurrency control and per-row permissions based on public key cryptography. A long list of old ideas combined in a new way. HTML/HTTP, if you like.
In addition to all of these, shared write databases require an entirely new type of rule, to restrict the transformations that a transaction can perform. This is an absolutely key innovation, and makes all the difference if we’re sharing a database between non-trusting entities. These types of rules can be expressed as bitcoin-style transaction constraints or Ethereum-style enforced stored procedures (“smart contracts”), each of which has advantages and disadvantages. Perhaps there are other better ways waiting to be discovered. But they all share the property of tying together the database’s state before and after a transaction takes place. In other words, they answer the question: Was that a valid transaction? This is fundamentally different from asking whether the database is valid at a single point in time.
If you’re wondering if this type of database has useful real-world applications, well that’s a fair question. But you might note the intense interest in private blockchains from one sector at least, because of their potential for simplifying processes and reducing costs and delays. Financial institutions are heavy users of today’s database platforms, and those platforms do not enable a shared write scenario. This is what banks are looking for.
This problem and its solution have absolutely nothing to do with bitcoin and the idea of censorship-free money. In fact, the only connection to bitcoin is the technical similarity between the bitcoin blockchain and how some of these private blockchains are implemented today. One key difference is that private blockchains don’t need proof of work mining, since blocks are created by a closed set of identified participants. Over time the two worlds may well diverge further, because their requirements are completely different. Whether you like financial regulation or not, the simple fact is that private blockchains are potentially useful in a regulated world, whereas for now at least, public blockchains are not.
If I may finish with an analogy, the UN Declaration on the Principles of International Law does not tell countries that they can hold any territory they want, so long as it’s surrounded by a clearly-marked fence. Rather, it states that “No territorial acquisition resulting from the threat or use of force shall be recognized as legal”. In other words, it’s a rule regarding the legitimacy of changes, not just of situations. And the UN declaration, which seems so obvious to us now, was a complete revolution in international law. It meant a world no longer based on unilateral power and authority, but one where differences can be resolved by mutual consensus.
When it comes to shared databases, private blockchains do exactly the same thing.
Bitcoin Price Prediction: BTC/USD Nosedives Toward $45,500
Bitcoin Price Prediction – May 15
According to the daily chart, the Bitcoin price loses traction after hitting $50,730; losses likely to continue in the near term.
BTC/USD Long-term Trend: Bearish (Daily Chart)
Resistance Levels: $55,000, $57,000, $59,000
Support Levels: $42,000, $40,000, $38,000
Looking at the daily chart, it can be easily seen that the market is back in the red zone as BTC/USD is posting losses of 5.27% on the day after touching the $50,730. It has an intraday high close to $51,000; although the world’s largest crypto faces a serious downtrend as it is currently trading at $47,265.19.
Bitcoin Price Prediction: BTC/USD May Return to Red Zone
Bitcoin price just plunged below $48,000 one more time, marking $47,250 as the current daily low at the moment. Does this mean that Bitcoin (BTC) is finally leaving the significant $48,000 level and searching for a new low? Nevertheless, looking at the declining daily volume candle, together with the steady movement below the 8-day and 21-day moving averages; it can be assumed that a serious bearish movement may be coming up soon into the market.
Moreover, at the time of writing, BTC/USD is struggling to maintain the $50,000 level and if the Bitcoin price follows the downward trend as the Relative Strength Index (14) moves into the oversold region, the next supports may likely come at $42,000, $40,000, and $38,000. From the upside, by maintaining the current level of $47,265 and any bullish movement could go above the 9-day and 21-day moving averages and send the price to the resistance levels of $55,000, $57,000, and $59,000 which could be well above the channel.
BTC/USD Medium-Term Trend: Bearish (4H Chart)
On the 4-Hour chart, BTC price hovers below the 9-day and 21-day moving averages around $48,446 which may take time to persistently trade above $50,000. In addition, if the bulls gather enough strength and regroup, the upward movement may be able to near the resistance level of $52,000 and above.
However, on the downside, immediate support is around the $47,500 level while the main support is at the $47,000 level. The price may likely fall below $46,000 if the bears step back into the market, a further movement could reach the critical support at $45,000 and below. Technically, BTC/USD is still moving in sideways while the Relative Strength Index (14) moves around 35-level, indicating an indecisive market movement.
Chainalysis: $81 Million crypto already stolen in 2021
TL;DR Breakdown At least $81 million in crypto already stolen in 2021 US authorities and their relationship with Chainalysis Chainalysis, a blockchain data analytical company, has said that at least $81 million has been stolen in crypto in 2021 owing to ransomware attacks. The attack led to $406 million crypto theft in 2020. The firm […]
- At least $81 million in crypto already stolen in 2021
- US authorities and their relationship with Chainalysis
Chainalysis, a blockchain data analytical company, has said that at least $81 million has been stolen in crypto in 2021 owing to ransomware attacks. The attack led to $406 million crypto theft in 2020.
The firm noted that ransomware attackers are growing more dangerous, more sophisticated, and sharply more profitable in extracting crypto from their victims.
The analytical firm notes that the number may likely rise as new criminal activities are still being uncovered.
Chainalysis said this in a blog post on Friday in a fraction of a forthcoming report on the state of ransomware in 2021. They are yet to announce when the entire report would be dropped.
A practical reference to the chainalysis claim is the Colonial Pipeline cyberattack, an American oil pipeline system.
The ransomware attack on the system resulted in a major gas shortage across the Southeastern US; the fuel provider reportedly paid out nearly $5 million in Bitcoin to a Russian criminal enterprise called DarkSide.
The analytical firm, in its reports, notes that the “Russian-affiliated cybercriminals so far this year have been the biggest financial beneficiaries of cryptocurrency-based crime.” Russia-linked strains have taken in 92% of this year’s ransomware proceeds, compared to 86% last year.
Ransomware payouts are also steadily growing. Victims paid an average of $54,000 in Q1, compared to $46,000 in Q4 2020 and just $12,000 on average in Q4 2019. There tends to be at least one $10 million ransom paid a quarter, but groups have demanded as much as $50 million.
Chainalysis, apart from providing analytical data about happenings in the crypto space, the firm also works with government agencies to help track down crypto criminals.
In 2020, the US Air Force agreed to a third contract with Chainalysis for crypto-related analytics.
The force partnered with the company to use its blockchain analytics services for largely unspecified reasons. According to the contract, they paid chainaysis about $779,740 for its service, which is dated May 19, 2020.
Combined, the Air Force has now spent $900,000 on Chainalysis’s analytics services.
Dogecoin Has Fallen, but People Still Love It
In the cryptocurrency space, it is usually considerably easier to focus on the negative than it is to look at the positive. As of late, Dogecoin is enduring some heavy suffering, with the fourth largest cryptocurrency by market cap falling as much as 20 percent in recent days, so for the most part, we are likely to see a lot of news coverage about this drop.
Dogecoin Is Still a Beloved Asset
However, despite this little setback, there is nothing to suggest that the currency has lost its appeal. The asset has reached a heavy pinnacle in a rather short amount of time, and the currency is doing better than it ever has largely because it has gotten heavy attention from the likes of Elon Musk and several other mainstream investors and businessmen, and the asset is almost as popular as BTC in many ways.
Billy Markus – the software engineer that helped establish the asset – acknowledges that this kind of attention is rather solid for Dogecoin, though he is confident that this is not the only reason behind its recent success. He says that the community surrounding Dogecoin has also contributed greatly to its growing status. In a recent interview, he comments:
The crypto community can be pretty elitist and not very inclusive, and we wanted to make a community that was more fun, lighthearted and inclusive. It worked, and that is why the Dogecoin community consistently maintains a presence.
He further added:
It is definitely absurd, but there is something pure about it, too.
The popular cryptocurrency was started in the year 2013 as a joke and was never meant to be taken seriously. Largely considered a “meme coin,” the currency took about two hours to create according to Markus, who was primarily looking to develop something that would make fun of cryptocurrency.
Often recognized for the cute little Shiba Inu dog that serves as its mascot, Dogecoin – Markus explains – has also become a big hit with people over the last year because of the growing coronavirus pandemic, which has caused heavy lockdowns and prevented many people from leaving their homes and living normal lives. He says that many people have been stuck sitting around watching their money remain stagnant, and Dogecoin trading has given them something to look forward to.
People have been suffering, stuck in their homes and struggling, seeing their dollar not go as far as it has previously.
It’s Brought Attention to the Market
Mike Bucella – a general partner at crypto investment firm Block Tower – says that where Dogecoin has really succeeded is in driving more attention to the crypto space. He claims:
Very few things have done as much to bring eyeballs and people into crypto. That is a crazy thing to say, but Dogecoin specifically has brought in the retail masses.
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