Oklahoma Bar Journal
Bitcoins, Blockchains and Satoshi Nakamoto: A Lawyer's Primer
By Larry D. Lahman
"There are lots of ways to make money: You can earn it, find it, counterfeit it, steal it. Or, if you’re Satoshi Nakamoto, a preternaturally talented computer coder, you can invent it. That’s what he did on the evening of January 3, 2009, when he pressed a button on his keyboard and created a new currency called bitcoin. It was all bit and no coin. There was no paper, copper, or silver – just thirty-one thousand lines of code and an announcement on the Internet.1”
Why should lawyers care about bitcoins2 and the lesser-known, but potentially far more important, blockchain in the news recently? There are numerous reasons but many are not yet known like Donald Rumsfeld’s unknown unknowns.3 Recall the internet decades ago when few envisioned Amazon, email, OSCN, Netflix, WikiLeaks, PACER, Google and the cloud.
For starters, bitcoins and the more numerous altcoins have value – value that varies wildly but value none the less.4 As moths to a flame, lawyers are drawn to value. Like fiat currency – dollars, yen and euros – bitcoins can be transferred, bought, sold, inherited, lost or stolen and consequently intersect with securities,5 taxes,6 divorce,7 estates,8 unclaimed property,9 bankruptcy10 and criminal law11 among others.
If for no other reason, lawyers should be familiar with bitcoins and the blockchain to avoid being like the late Sen. Ted Stephens who once said the internet was “just a series of tubes.”12
EVOLUTION OF BITCOINS
Cryptocurrencies or crypto are digital assets that work as a medium of exchange using cryptography to create units called coins, verify their transfer and secure transactions. Crypto is not issued by any central authority and is theoretically immune from government interference or manipulation. Crypto’s decentralized control works via a blockchain or a digital public ledger of all transactions.13 The blockchain ledger grows as the most recent transactions – completed blocks – are recorded and added to the blockchain in chronological order allowing anyone to track digital currency online without central recordkeeping.14
Bitcoins have an interesting backstory. Created in 2009, bitcoins were the first15 decentralized cryptocurrency16 that arose out of the 2008 financial crisis when people lost confidence in banks and bankers.17 Satoshi Nakamoto is the name or pseudonym of the unknown person18 who initially designed the bitcoin and created the bitcoin blockchain19 and other key elements in his seminal 2008 paper20 that started the crypto revolution.
Anyone can use his software21 and Satoshi, as he is known in the Bitcoin world, now has no more control over bitcoins or the blockchain than anyone else. Satoshi is one of the wealthiest persons in the world having mined nearly a million bitcoins to prove his concept and populate the blockchain that are still there. Satoshi’s bitcoins initially had infinitesimally small or peppercorn like value. However, as bitcoins became more widely accepted, their value approached $20,000 in late 2017 making him worth an estimated $19 billion and the 44th richest person in the world.22
And yet [Satoshi] himself was a cipher. Before the début of bitcoin, there was no record of any coder with that name. He used an e-mail address and a Web site that were untraceable. In 2009 and 2010, he wrote hundreds of posts in flawless English, and though he invited other software developers to help him improve the code, and corresponded with them, he never revealed a personal detail. Then, in April, 2011, he sent a note to a developer saying that he had “moved on to other things.” He has not been heard from since.23
BITCOINS AS CURRENCY
Bitcoins are currency but they are not backed by any country’s central bank or government. Bitcoins can be traded for goods or services with merchants accepting bitcoins,24 automatically converted into dollars and quickly deposited into their bank accounts. Millions of products,25 thousands of local businesses26 and hundreds of large companies27 worldwide take bitcoins today.
There are no physical bitcoins, only balances kept on the blockchain public ledger in the cloud verified by massive computing power.28 While bitcoins get all the publicity, altcoins make up the majority of crypto market capitalization. Altcoins are any cryptocurrency other than bitcoins that use the same basic building blocks as bitcoin. There are well over a thousand altcoins like Ripple,29 Dentacoin,30 Sexcoin,31 Musicoin,32 Potcoin33 and Russian Farmer Coin34 that grow almost daily.35 Most seek to meet some need other than as cryptocurrency.
Altcoins are generally formed to improve bitcoin in some way by adding distinguishing characteristics and capabilities that bitcoin lacks and consequently may eventually become more important than bitcoins. For example, Bitcoin Cash, a spinoff or hard fork,36 processes more transactions in a single batch, so Bitcoin Cash can be faster and cheaper to use.37
While the bitcoin blockchain supposedly allows users to remain anonymous, it is possible to identify some specifics of transactions, which is how investigators track down those selling drugs for bitcoins on the dark web.38 Websites accepting bitcoins began to proliferate with the first popular black-market site Silk Road, which was taken down in 201339 leading to the formation of numerous privacy coins40 like Zcash and Bitcoin Private. Both further anonymize users through privacy technology similar to bitcoin with payments visible on a public blockchain although the sender, recipient and other transactional data remain unidentifiable.
Bitcoins are traded like stocks and bonds at hundreds41 of online cryptocurrency exchanges such as Coinbase.42 Altcoins are also traded with values available online; however, bitcoins remain the most widely used coin. Late last year global cryptocurrency markets were averaging the same daily trading volumes as the New York Stock Exchange.43
Scams, ineptitude and fraud abound, with the most famous one being in 2014 when Japan’s Mt. Gox, then the world’s largest crypto exchange, lost $460 million in bitcoins to hackers.44
Coins are managed using wallets that store data with a unique public address, similar to a bank account number, for the wallet and a unique private key, comparable to an ATM PIN, for the coins owned. Both are extremely complex alphanumeric strings (e.g., 1CabzhGs69Ej8G2xYi959jTBMwuDJfJUot). Wallet types include software, online, hardware, paper and mobile.45 A wallet address and coin key can theoretically be managed in a brain wallet but not in practice since they are so complex. If the key is forgotten or lost,46 the bitcoins are irretrievable because, without the key, it’s impossible to spend the associated bitcoins.47
Altcoin transaction fees are complicated and very widely but potentially attractive alternatives to credit cards.48 Credit card transaction fees are usually about 3 percent, but some altcoin fees are less than 1 percent at an exchange and less for direct transactions between buyers and sellers.
Bitcoin facilitates very small micropayments. With eight decimals of precision, one can spend 1/100,000,000th (0.00000001) of a bitcoin. This smallest fraction of a bitcoin, the bitcoin “penny,” is known as a Satoshi after the creator of bitcoin. Micropayments might solve the spam problem,49allow online services to economically sell access to one newspaper article or permit limited use of data for just one Satoshi equal to $0.00006 at a recent bitcoin value of $6,000. Good luck doing that with Visa or MasterCard.
Bitcoin uses Satoshi’s blockchain technology, which is also known as distributed ledger technology. The technology is potentially far more important and disruptive than its use for cryptocurrency partly because of disintermediation – cutting out middlemen like stockbrokers, bankers, escrow agents and others. Simplified, the blockchain is an incorruptible digital ledger of transactions that can be programmed to record virtually anything using a continuously growing list of records or blocks linked and secured using cryptography. Each block contains a cryptographic hash50 of the previous block, a timestamp and transaction data inherently resistant to modification of the data. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks requiring collusion of the network majority – a practical impossibility51with very large numbers of networked computers or nodes.52
Every major corporation, including IBM, Walmart, Starbucks and Boeing, is exploring how to profit from the blockchain. Supply chain management tops the list.
Frank Yiannas has spent years looking in vain for a better way to track lettuce, steaks and snack cakes from farm and factory to the shelves of Walmart, where he is the vice president for food safety. When the company dealt with salmonella outbreaks, it often took weeks to trace where the bad ingredients came from.
Then, last year, IBM executives flew to Walmart’s headquarters in Arkansas to propose a solution: the blockchain.
As Mr. Yiannas studied their pitch, he said, “I became increasingly convinced that maybe we were onto the holy grail.”53
Starbucks wants to use the blockchain to trace the ownership, quality and provenance of coffee beans from growers in Ethiopia to its baristas in Seattle, and Boeing wants to replicate that with airplanes.
Supply chain management is just the beginning. Land registration trials at the Sweden Land Registry are testing the blockchain to expedite land transactions eliminating the need for abstractors, escrow agents and lawyers. Yes, lawyers! Closer to home with eight decimal places of accuracy, an oil company could manage mineral ownership using a permissioned blockchain to track owners and replace division orders.54
Nonprofits like the Bill & Melinda Gates Foundation aim to use a blockchain to help the 2 billion people worldwide who lack bank accounts. Sierra Leone experimented with the blockchain to eliminate election fraud. Smart contracts written in computer code rather than on paper are self-
executing agreements that incorporate multiple blockchain tools to handle things like closings, ownership and crypto payments.
Work is also underway to disintermediate Uber, AirBNB and Spotify using blockchains benefiting both buyers and sellers but not the intermediary. The possibilities are limitless.55
Bitcoins and altcoins are created by a process known as mining – a euphemism for using computers to “discover” new coins.56 Miners with computers on the internet solve extraordinarily complex mathematical equations to validate transactions and add the transaction to the blockchain for a reward of coins. Miners use hardware and software algorithms57 tailored for the coin being mined to be paid an award of newly created coins as motivation to mine, provide security for the system and supplement the blockchain. Crypto doesn’t exist without miners.
Miners range from hobbyists58 with laptops to multimillion dollar companies with massive mining farms generating millions of dollars of coins monthly. Because mining requires large amounts of electricity,59 big miners locate where electricity is cheap like China and the Pacific Northwest of the United States. Smaller miners commonly join mining pools60 that aggregate their efforts to smooth out or average the award of coins. A small solo miner may take years or even decades to receive an award of one bitcoin; however, mining pool participants receive smaller awards much more regularly and often.
For those who want to mine but not the hassle of dealing with hardware and software, cloud mining companies rent customers time on their systems to mine in the cloud and keep the coins.
VALUE OF BITCOINS
The value of crypto, like bitcoins, is whatever the marketplace says its worth61 because coins are not backed by gold, physical assets, a government or even the promise of someone to pay.62 Bitcoin values have almost unparalleled volatility fluctuating nearly $1,000 in an hour.63
Like most things, coin values partly depend on how many exist. There are now about 17 million bitcoins64 that increase every 10 minutes from mining until there will be a maximum of 21 million bitcoins in 2140.65 The protocol or software66 undergirding bitcoin mining automatically changes the difficulty of mining to maintain a constant rate of formation of bitcoin. One block is mined roughly every 10 minutes and presently 12.5 bitcoins67 are awarded for each block mined. However, that award is periodically reduced so that in 2140 it will disappear.68 Unlike governments that can print paper currency at will, the number of bitcoins created is finite and always known.69 Altcoins use a similar methodology to control
the number of coins.
Most altcoin values tend to move in near lockstep70 with the bitcoin71 but also very much depend on how they differ from bitcoins. For example, bitcoin transactions are booked or confirmed once they are included in a block in the blockchain. However, cautious merchants and exchanges require multiple confirmations, often as many as six taking an hour or longer, before they definitively credit ownership of the bitcoins to the new owner. Contrast this with the Verge altcoin72 that claims to confirm transactions in five seconds. This speed of confirmation potentially makes Verge a more suitable replacement for commercial transactions and credit cards increasing its value if the marketplace deems it a viable alternative to bitcoins.
Bitcoins may cease to exist for any number of reasons like a superior altcoin, governmental regulation73 or outright prohibition;74 however, the smart money says that something like bitcoins will long be around. Even the stupid money says the blockchain will likely be with us forever.75
ABOUT THE AUTHOR
Larry D. Lahman is the senior partner of Enid’s Mitchell DeClerck founded in 1893. His first encounter with high-tech was programming a room-sized IBM 360 computer – one-hundredth as powerful as an iPhone – in graduate school in 1965. He has degrees from OU and Northwestern Oklahoma State University. This is his 10th Oklahoma Bar Journal article.
1. Joshua Davis, “The Crypto-Currency: Bitcoin and Its Mysterious Inventor,” Oct. 10, 2011, The New Yorker. See also www.metzdowd.com/pipermail/cryptography/2009-January/014994.html. For brevity, dates of the last visit to URLs are omitted, but all were observed within 90 days of publication.
2. This article does not pretend to be scholarly but merely a basic introduction to crypto and blockchains with detail in the footnotes for those interested in more technical background or just exploring further. Luddites may skip the footnotes.
3. “There are known knowns, things we know that we know; and there are known unknowns, things that we know we don’t know. But there are also unknown unknowns, things we do not know we don’t know.” [Emphasis added.] Donald Rumsfeld, “Known and Unknown: A Memoir,” Sentinel, 2011. One known known is that all of this is changing very, very rapidly.
4. Total crypto market capitalization exceeded $830 billion in January 2018 but fell to $250 billion three months later. Bitcoins are now about 40 percent of that and their share decreases as altcoins proliferate. See coinmarketcap.com/charts/.
5. Whether crypto is a security or not is in flux, “Blockchain Believer and Former Regulator Sounds a Warning,” April 22, 2018, The New York Times. Among other things this turns on the crypto creator’s influence over the coin’s value, “World’s Second Most Valuable Cryptocurrency Under Regulatory Scrutiny,” May 1, 2018, The Wall Street Journal. For an example of how rapidly things change in just a month, see www.wsj.com/articles/ether-shouldnt-be-subject-to-sec-regulation-official-says-1528993984.
6. IRS regulations about crypto have been atypically sparse. Presently the Federalies say crypto is property and mined crypto is income, IRS Notice 2014-21. See www.irs.gov/newsroom/irs-virtual-currency-guidance.
7. See mensdivorce.com/bitcoins-hiding-assets-divorce/.
8. See www.coindesk.com/5-things-bitcoin-owners-must-do-when-estate-planning/.
9. See bitcoinist.com/coinbase-hit-second-class-action-lawsuit-violating-unclaimed-property-laws/.
10. “Hack Causes Exchange to File for Bankruptcy,” Dec. 20, 2017, The Wall Street Journal.
11. See www.fraud-magazine.com/article.aspx?id=4294993747.
12. “Senator’s Slip of the Tongue Keeps on Truckin’ Over the Web,” July 17, 2006, The New York Times.
13. More specifically, “a distributed, append-only ledger of provably signed, sequentially linked, and cryptographically secured transactions replicated across a network of computer nodes, with ongoing updates determined by a software-driven consensus,” Michael Casey and Paul Vigna, p. 68, The Truth Machine: The Blockchain and the Future of Everything, St. Martin’s Press, 2018.
14. It’s simple. Think of the blockchain as an electronic version of the large red leather-bound ledger book merchants used early in the last century. Each ledger page is like a block in the blockchain and each line on that ledger page (or block entry) is one transaction – written in indelible ink.
15. Crypto has roots in gaming and the original vehicle by which many people got used to the idea of buying virtual goods with digital money: FarmVille gamers bought virtual cows and many games with an in-game economy function with their own digital currency that players buy with real fiat currency. It’s a one-way street; however, while Candy Crush Gold can be purchased with dollars, dollars can’t be bought with Candy Crush Gold. “Where Virtual Worlds Collide with Real Money,” Aug. 22, 2010, The Guardian.
16. Cryptocurrency is just one of several different types of digital currency. See en.wikipedia.org/wiki/Cryptocurrency. See also en.wikipedia.org/wiki/Digital_currency. In the absence of bitcoin treatises, Wikipedia must suffice.
17. “[T]rust in the ability of governments and banks to manage the economy and the money supply was at its nadir. The US government was throwing dollars at Wall Street and the Detroit car companies. The Federal Reserve was introducing ‘quantitative easing,’ essentially printing money in order to stimulate the economy.… [T]he predetermined release of the digital currency kept the bitcoin money supply growing at a predictable rate, immune to printing-press-happy central bankers and Weimar Republic-style hyperinflation.” See Benjamin Wallace, “The Rise and Fall of Bitcoin,” Nov. 2011, Wired.
18. Or persons. It could be he, she or they but let’s go with he for simplicity.
19. The first blockchain came in 1990, “The Eureka Moment That Made Bitcoin Possible,” May 25, 2018, The Wall Street Journal. See also Stuart Haber and W. Scott Stornetta, “How to Time-Stamp a Digital Document,” Journal of Cryptology, Vol. 3, No. 2, pp. 99, 1991.
20. Satoshi’s epiphany was to solve the double spend problem. A holder can copy a digital token and send it to a merchant while keeping the original and spending it a second time; however, bitcoin authenticates each transaction preventing double spending. See bitcoin.org/Bitcoin.pdf.
21. See bitcoin.org/en/download.
22. This is a known known because Satoshi’s bitcoins can be identified online with virtual certainty in the public bitcoin blockchain. See qz.com/1159188/Bitcoin-price-approaches-20000-making-satoshi-nakamoto-worth-19-4-billion/.
23. Emphasis added, Davis. Well maybe not. An untold number of journalists have attempted to unearth the real identity of Satoshi, purportedly even the National Security Agency, medium.com/cryptomuse/how-the-nsa-caught-satoshi-nakamoto-868affcef595. However, just after this article was initially submitted to OBJ editors, someone claiming to be Satoshi himself surfaced saying that he was writing a book on the bitcoin, www.bloomberg.com/news/articles/2018-06-30/is-bitcoin-creator-writing-a-book-cryptic-note-indicates-yes. See also nakamotofamilyfoundation.org/ and nakamotofamilyfoundation.org/duality.pdf. Time will tell and perhaps by the time this is read, Satoshi will have been on 60 Minutes.
24. On May 22, 2010, Laszlo Hanyecz consummated the first real-world bitcoin transaction by buying two pizzas in Jacksonville, Florida, for 10,000 bitcoins – millions for two pizzas at today’s prices. See en.wikipedia.org/wiki/History_of_bitcoin.
25. See spendabit.co/.
26. See coinmap.org/welcome/.
27. See 99bitcoins.com/who-accepts-bitcoins-payment-companies-stores-take-bitcoins/.
28. In late 2017, bitcoin network computing power was estimated at 100,000 times the combined power of the world’s 500 fastest supercomputers. See www.wired.com/story/bitcoin-mining-guzzles-energyand-its-carbon-footprint-just-keeps-growing/29. Bitcoin uses a totally decentralized public blockchain; however, private or permissioned blockchains require permission to read, transact and write into the chain. See www.coindesk.com/information/what-is-the-difference-between-open-and-permissioned-blockchains/. Ripple’s permissioned blockchain enables secure, rapid, inexpensive global financial transactions, i.e., wires. That it requires permission or “vetting” to use makes it much more palatable to large financial institutions. See also ripple.com/.
30. Dentacoin is a form of a dental health maintenance plan. See dentacoin.com/.
31. Sexcoin unsurprisingly has ties to the adult entertainment industry featuring secrecy. See www.sexcoin.info/.
32. Musicoin enhances artists’ control of and compensation for their content. See en.wikipedia.org/wiki/Musicoin.
33. PotCoin promotes legal marijuana with its own “Pot Wallet” for Android phones and iPhones coming. See www.potcoin.com/.
34. Well not quite but a Russian farmer has developed the Kolion crypto coin to promote his rural Russian farming village illustrating the potential for a very real crypto dot-com-like bubble reminiscent of the collapse of the early 2000s, “Russian Farmer Alters Rural Economy with Virtual Currency, as Moscow Watches Warily,” April 22, 2018, The Wall Street Journal. But there is a Russian Miner Coin (RMC), see coinmarketcap.com/currencies/russian-mining-coin/.
35. Altcoins often start with an Initial Coin Offering or ICO that is a fundraising mechanism somewhat like crowdfunding. The ICO funds projects by exchanging tokens for bitcoins, similar to an Initial Public Offering or IPO where investors purchase shares of a new company. See www.nasdaq.com/article/what-is-an-ico-cm830484. ICO’s and tokens are beyond the scope of this article but are a potential source of fraud, “Hundreds of Cryptocurrencies Show Hallmarks of Fraud,” May 18, 2018, The Wall Street Journal.
36. See fortune.com/2017/08/07/bitcoin-cash-bch-hard-fork-blockchain-usd-coinbase/. A blockchain fork is a change to the coin’s underlying software protocol resulting in two different methods of maintaining the blockchain – one fork or path follows the new, modified blockchain and the other fork continues along the old path. Simply, a hard fork is a radical change; a soft fork is less so. See cryptocurrencyfacts.com/understanding-hard-forks-cryptocurrency/.
37. A hard fork created Bitcoin Cash when the underlying bitcoin software was modified allowing its blockchain to better scale to handle more transactions with new technology. Before only about seven transactions could be processed per second on bitcoin’s blockchain compared to 65,000 per second by Visa. Some bitcoin developers, believing that involved the wrong programming choice, hard forked the bitcoin blockchain creating a new version entirely (Bitcoin Cash) with different scaling technology, pp. 72-77, Casey et al.
38. The dark web is composed of content – very often involving something illegal – on overlay networks that use the internet but require specific software, configurations or authorization to access. See en.wikipedia.org/wiki/Dark_web.
39. “Zcash, Less Traceable Than Bitcoin, Draws Investors,” Oct. 31, 2016, The New York Times.
40. This extreme privacy may be the Achilles heel of privacy coins as regulators in some countries have pressured local exchanges to delist privacy coins that cannot be tracked by law enforcement agencies. The inability of coins to be easily traded on exchanges seriously impairs their value. See bravenewcoin.com/news/japan-pressures-exchanges-to-drop-monero-zcash-and-dash/.
41. See news.bitcoin.com/the-number-of-cryptocurrency-exchanges-has-exploded/.
42. Coinbase is the dominant place for Americans to buy and sell crypto. Coinbase accounts went from 5.5 million in January to 13.3 million at the end of 2017, when Coinbase was sometimes getting 100,000 new customers a day – far more than Charles Schwab and eTrade gain in a day, “Start-Up Exchange at Center of a Frenzy Strains to Keep Pace,” Dec. 6, 2017, The New York Times.
43. Albeit at bitcoins’ peak value, www.businessinsider.com/daily-cryptocurrency-volumes-vs-stock-market-volumes-2017-12.
44. Robert McMillan, “The Inside Story of Mt. Gox, Bitcoin’s $460 Million Disaster,” March 2014, Wired. See also www.bloomberg.com/news/articles/2018-07-05/crypto-thefts-triple-as-coin-money-laundering-industry-grows-up?srnd=cryptocurriences. Billionaire Warren Buffet says bitcoins are “probably rat poison squared,” “Coming Soon: Bitcoin Trades on Wall Street,” May 7, 2018, The New York Times.
45. See www.coindesk.com/information/how-to-store-your-Bitcoins/.
46. In 2017, an estimated 3.7 million bitcoins had been lost then worth $43 billion. See fortune.com/2017/11/25/lost-bitcoins/.
47. Biometrics are an alternative to these complex keys. A United Nations’ program known as Building Blocks uses a blockchain to control food rations in camps with tens of thousands of refugees. Refugees get food using scans of the iris of their eyes greatly reducing fraud and administrative costs. The UN has plans for its Building Blocks blockchain that are much more far-reaching than just food, “Inside the Jordan Refugee Camp that Runs on Blockchain,” May/June 2018, MIT Technology Review.
48. See en.bitcoin.it/wiki/Transaction_fees.
49. If email was “taxed” at say 40 Satoshi’s each, spammers sending 100,000 spam a day would pay over $100,000 a year. Others sending 25 emails a day would pay less than a dime a day. Or if the first 100 a day were free, nothing.
50. A hash is a mathematical function that takes an input value and from that input creates an output value deterministic of the input value. Any X input value will always return the same Y output value whenever the hash function is run. In this way, every input has a determined output. There are many hash functions. See learncryptography.com/hash-functions/what-are-hash-functions and en.wikipedia.org/wiki/Cryptographic_hash_function. Secure hash algorithm – 256 bit (SHA-256) is a common robust one.
51. Well not quite. This evokes the possibility of a 51 percent attack hijacking the blockchain that’s outside the lane of this article. However, the more miners and hashing power mining a coin, the more difficult it becomes to convince 51 percent of the miners to collude and take control of the blockchain. Conversely, newer altcoins inherently have fewer miners making takeover theoretically more possible, but those altcoins are much less valuable with less incentive for collusion. Another practical reason is that it’s been estimated a 51 percent attack on bitcoin would cost over $2 billion for hardware and electricity to be successful, p. 68, Casey et al. Nevertheless, $18 million in Bitcoin Gold was recently lost from a 51 percent attack necessitating a hard fork, fortune.com/2018/05/29/bitcoin-gold-hack/.
52. A computer connected to the blockchain is a node. Different types of nodes – simple, partial, lightweight, full and master – with increasing levels of complexity maintain the blockchain. See en.wikipedia.org/wiki/Blockchain.
53. Emphasis added. “IBM Bets Big on the Arcane Idea Behind Bitcoin,” March 4, 2017, New York Times. “[The] IBM Food Trust uses the blockchain to connect participants through a transparent, permanent and shared record of food origin details, processing data, shipping details and more …. [with] dozens of individual food items, from vegetables, meats, to spices, fruits and more, and [fish]. IBM notes that the use of blockchain technology can reduce the cost of the average product recall by up to 80%.” See www.forbes.com/sites/rachelwolfson/2018/07/11/understanding-how-ibm-and-others-use-blockchain-technology-to-track-global-food-supply-chain/#7206f6f22d1e.
54. While anonymity and secrecy are advantages of the blockchain, a new blockchain, or a fork of an existing one, could allow more public detail like names and addresses or to increase the accuracy of ownership from eight decimals to 10, 12 or 100.
55. Google “blockchain” and blood diamonds, vehicle titles, ride sharing, medical records, copyrights, art, stocks, transcripts, professional licenses, marriages, births, citizenship – anything dealing with ownership or provenance and then some.
56. There are exceptions. Some coins are issued to their creators, some are backed up by fiat currency and some new coins are typically given gratis to owners of the original altcoins to promote the new coin when a hard fork generates the new altcoin.
57. There are two primary types of hardware used for mining: graphics processing units (GPU) used by gamers and smaller miners and application specific integrated circuits (ASIC) designed solely for mining typically used by big mining farms. This provides the impetus for a unique altcoin characteristic: ASIC resistance. Some altcoins tailor mining algorithms to thwart ASIC miners and centralized control of the blockchain by a few exceptionally large ASIC miners and in turn, reduce the possibility of a 51 percent attack. Two others, central processing units (CPU) and field-programmable gate arrays (FPGA), currently mine nominal amounts of coins.
58. For those interested in inexpensively experimenting with bitcoin mining, the Bitcoin Miner app found in the Microsoft Online Store is free and can be up and mining in 10 minutes. Just don’t plan on getting rich as it only generates pennies a day.
59. Bitcoin mining globally consumes more energy than many countries including Switzerland. See digiconomist.net/bitcoin-energy-consumption. Ironic because some in Switzerland seek to become “Crypto Valley,” “Swiss authorities tread wary path through ‘Crypto Valley,’” March 20, 2918, The Financial Times. Some altcoins like ethereum are exploring an alternative to the energy-intensive proof of work method used to sequentially allocate cryptographic mining efforts. This new proof of stake method assigns work based on the number of coins owned greatly reducing the electricity required by eliminating the massive numbers of miners simultaneously mining and competing for coins.
60. Mining pools are full nodes maintaining the complete blockchain that can be quite large. Participating miners are lightweight nodes using only block headers necessary to authenticate transactions, www.investopedia.com/terms/l/lightweight-node-cryptocurrency.asp. For an example of a mining pool, see miningpoolhub.com/.
61. Or perhaps MV=PQ, see www.bloomberg.com/news/features/2018-04-19/what-bitcoin-is-really-worth-may-no-longer-be-such-a-mystery?srnd=cryptocurriences. See also www.investopedia.com/tech/what-determines-value-1-Bitcoin/.
62. There are altcoin exceptions like Tether that claim to be backed up dollar for dollar with fiat currency. See tether.to/.
63. See fortune.com/2018/04/12/bitcoin-price-cryptocurrency-ethereum-ripple/. Or from about $1,000 to $19,000 and back down to $6,000 since the beginning of 2017 and why merchants automatically convert bitcoin into fiat currency deposited with their banks.
64. See blockchain.info/charts/total-Bitcoins?timespan=all.
65. See coincentral.com/how-many-Bitcoins-are-left/.
66. See github.com/Bitcoin/Bitcoin.
67. An award of roughly $10,000 a minute as of this writing but that varies by the minute.
68. Miners are compensated with transaction fees in addition to coins, which is how it’s blockchain will be supported beyond 2140.
69. Another well not quite: The protocols behind bitcoin and most altcoins can change through a hard fork or a soft fork modifying characteristics of their blockchains that could change the ultimate number of coins issued. A detailed discussion explaining why this is very unlikely is beyond the scope of this article. Who controls the software behind a coin’s blockchain is complex, unpredictable and market-driven with stakeholders including miners, exchanges, investors, owners of coins and the developers – the “community” in crypto world – having a say that can vary significantly from coin to coin. See bitcoin.org/en/about-us.
70. See www.bloomberg.com/news/articles/2018-01-15/these-digital-coins-soar-or-fall-with-bitcoin-quicktake-q-a?srnd=cryptocurriences.
71. This website coinmarketcap.com/ lists the values of coins and the charts tracking values of each are quite often congruent.
72. See www.forbes.com/sites/jessedamiani/2017/12/19/crypto-watch-verge-xvg-price-climbs-800-in-a-week-what-is-xvg-and-why-is-it-growing-so-fast/#53579c62444e.
73. See www.bloomberg.com/news/articles/2018-07-11/china-shifts-to-bitcoin-wasteland-from-epicenter-after-clampdown.
74. Saving one of the most complex issues to the end, the legality of bitcoins and altcoins ranges from one extreme to the other. At one end of the spectrum Japan has declared bitcoin “legal tender” while at the other end, Namibia has expressly declared that purchases with bitcoin are “illegal.” See www.coindesk.com/information/is-bitcoin-legal/.
75. “Why Blockchain Will Survive, Even If Bitcoin Doesn’t,” March 12, 2018, The Wall Street Journal.