Tag Archives: blockchain

Living on Satoshi Time: What Block is it?

A Bitcoin Calendar System 

Today is Block Year 12,  and within the year it is Block Day 131, within Block Month 5

Bitcoin Generates its own Calendar

Our Gregorian calendar is based on the Solar year, the Lunar month, and the Terrene (Earthly) day. Bitcoin has its own natural calendar that can be constructed to approximate our human calendar of years, months, and days.

But the details are a bit different, and since Bitcoin is a dynamic process built around the construction of blocks, block count, not regular calendar time, is the most relevant and precise way of looking at the passage of time in the Bitcoin context.

Bitcoin’s fundamental process driver is the construction of a chain of blocks. Blocks are created one at a time and chained together in a time chain, or blockchain. That process and the ever-growing chain drives Bitcoin’s security and its value. The value comes both from security and scarcity, and the money supply is created on a per block basis, via a block reward for the winning miner.

The block count is the clock. It is the system’s heartbeat. Bitcoin has its own clock that has a rough correspondence with wall clock time. Yet it has its own cycles, years, months and days of somewhat different and varying duration from regular time but with an approximate correspondence.

I now describe a natural Bitcoin calendar system, based on the block length at the short end, the difficulty adjustment in the mid-range, and the Halving cycle at the long end.

We designate block height or block number by the variable B.

The first year is designated Year 1, Anno Satoshi, 1 A.S. and it originated with the first block B = 1 that was completed on 9 January 2009.

Block Year, Block Month, Block Day and more

So now let’s look at the Block Era, Block Year, Block Quarter, Block Month, Block Fortnight, Block Week, Block Day, Block Hour, and Block Minute. They are roughly equal to our familiar calendar and time intervals, but not precisely.

Bitcoin is a dynamic process creating blocks approximately, but not exactly, every 10 minutes. So BlockTime will deviate from wall clock time. There is a self-correcting process within the Nakamoto consensus algorithm that is called the difficulty adjustment, and which occurs every 2016 blocks; this is approximately every two weeks of wall clock time.  Increasing or decreasing the difficulty regulates the block interval back toward 10 minutes’ duration.

The block duration and the difficulty adjustment are two of our pegs for the Bitcoin calendar system.

The most important aspect of Bitcoin’s monetary policy are the Halvings, which occur every 210,000 blocks. The block subsidy (mining reward) is cut in half after each 210,000 blocks, which also roughly equals a four-year period.

The formula for Bitcoin supply creation and Halvings, denominated in Satoshis (each Bitcoin contains 100 million Satoshis). The original reward was 50 Bitcoins with Blocks 1 through 209,999 and then cut to 25 Bitcoins from Block 210,000 through 419,999 and so forth.

No need to memorize the formula! 

Block, Difficulty, Halvings Define the Calendar

So these three pegs of block (Earthly: around 10 minutes), difficulty adjustment (Lunar: around two weeks), and Halvings (Solar: around four years) allow us to define a Bitcoin calendar system.

The calendar begins with B=1 on January 9, 2009 and that initiates the Age of Satoshi. Years are rendered as A.S. (Anno Satoshi), counting begins at year one. We are now in the 12th BlockYear, the last year of the third Reward Era.

Months and weeks are numbered from 1 to 12 and from 1 to 52, respectively, within a year. Like the Gregorian calendar there are precisely 12 months, but the calendar has slightly more than 52 weeks.

It is easy to determine the natural rhythm of the Bitcoin calendar. Rows in italics are the three pegs we build the system around.


Block Century = 5,250,000 blocks (25 Eras, 100 Block years)

Block Era (Cycle, Reward Era) = 210,000 blocks

Block Year = 52,500 blocks (one quarter of a Block Era)

Block Quarter = 13,125 blocks (one quarter of a Block Year, or three Block Months)


Block Month = 4375 blocks (1/12 of a Block Year, and unlike Gregorian calendar, all of equal length)

Block Fortnight = 2016 blocks (the difficulty adjustment period, and two Block Weeks)

Block Week = 1008 blocks (52 weeks plus a bit in a year, not unlike the Gregorian calendar)


Block Day = 144 blocks (1/7 of a Block Week, 24 Block Hours)

Block Hour = 6 blocks (nominal block time is 10 ordinary minutes)

Block Minute = 0.1 blocks

We can refer to these either as BitYear, BitMonth, BitWeek, BitDay, BitHour, etc.,


BlockCentury, BlockEra, BlockYear, BlockQuarter, BlockMonth, BlockFortnight, BlockWeek, BlockDay, BlockHour, BlockMinute.

We will see what the community gravitates toward. And in either case the abbreviations can be:

Solar: BCentury, BEra, BYr, BQ

Lunar: BMo, BFort, BWk

Terrene: BDay, BHr, BMin

Here are the formulae for the longer intervals

BCentury = int(B/5,250,000)+1

BEra = int(B/210,000)+1

BYr = int(B/52,500)+1

Within a given year, the quarter and month number are given by:

BQ = 1 + int (B/13125) – 4 * (BYr – 1)

BMo = 1 + int (B/4375) – 12 * ( Byr – 1)

One good thing is that we have no leap years, although there are definitely parties at each 4 BlockYear interval for Halving Day.

The BlockYear has 52 weeks plus an extra short day of 84 blocks (14 BlockHours). It also has exactly 12 BlockMonths. The BlockMonth has 30.382 days, or 30 days plus a short day of 55 blocks (9 BlockHours and 1 additional block). 

Example: Block #596323 at 23 Sep 2019-09-23 04:09:32.  

Using the above formulae

BEra (596323) = 3, Byr (596323) = 12, BQ = 2, BMo = 5

and the block corresponds to the 10th fortnight, the 19th week, and 131th day of Byr 12.

A more accurate Basis for analysis

I suggest that it is much more natural, appropriate, and accurate to do price, market cap, hashrate, transaction value and other studies on a Bitcoin Calendar basis, in order to examine correlations and co-integrations of these quantities with a time related variable.

The results can then be converted to regular Gregorian calendar time after the analysis for presentation purposes.

Have a nice Block Day! BYr 12-131(5) A.S. Notation: BYr-BDay (BMo)

Libra: Corporate Money in furtherance of surveillance capitalism

This blog is the first of a two-part series capturing my thoughts on Libra, Facebook’s cryptocurrency announced in mid-June. My thanks to Shahin Khan for his comments and suggestions.

Libra is a clever name. It implies harmony, peace and balance. Librae was also an ancient Roman unit of weight and was used in Middle English to refer to a pound. As we know the English monetary pound started out as a pound of silver. It’s symbol continues to be a special form of the letter L. So there is a deep historical monetary reference.

Libra aims to be the coin that takes cryptocurrency mainstream. Starting in 2020.

Government Money, Private Money, Corporate Money

The idea of a fully digital or electricity-based money goes back several decades. The introduction of Bitcoin in 2008/09 was both a result of technological advancements that provided the foundation for a secure cryptocurrency and a reaction to the failures of the banking system and fiat currency that produced the Great Recession.

Bitcoin fits in the category of Private Money. No government issues it; no corporation is behind it. It is created on ‘mining’ computers in accordance with the Nakamoto consensus and its monetary policy, with a Proof of Work cryptographic algorithm; anyone can mine it. It as if you dug up gold and refined it and fashioned into a bar and stamped the weight and fineness. In this case the Nakamoto consensus inserts the new money into the decentralized open ledger for Bitcoin at the public address of the miner and under the control of the private key of the miner. The miner can sell (transfer to another public address) the Bitcoin for fiat on an exchange and use that fiat to pay the electricity bill and other costs.

Libra, introduced by Facebook and 27 Association partners in mid-June 2019 is, make no mistake, Corporate Money. It is created by an association of corporations in a partnership expected to grow to perhaps 100 members over time. Each member of the association has to stake $10 million to join and must fulfill other requirements related to size and reputation. (Certain non-profits can join under less stringent guidelines).

Is it a blockchain? 

These Association members are then able to act as validators of transactions into the open quasi-decentralized ledger of Libra. This is a permissioned ledger maintained by the Association members who take turns serving as the lead validator, each with the larger of 1 vote or 1% of votes.

A key part of the security of Bitcoin is based in chaining of transaction blocks. The chain is created by hashing the previous block and inserting that hash into the current block, and doing this repetitively.

In the Libra model, the block and the chain are virtual. Libra blocks are batches of transactions as proposed by the lead validator. A 2/3 quorum among validators is required to approve the block of transactions. Establishing that quorum relies on a chain, but there is no direct relationship between the ‘block’ and the ‘chain’ for these.

Referring to it as the Libra Blockchain, as the white papers do, is a marketing stretch at best. Each new transaction creates a new ledger state that is stored as a Merkle tree and validated. There are no blocks in the ledger, much less a blockchain. Facebook wants to use the term to help ease the regulatory burden perhaps, and because of general market awareness.

The consensus used by validators is a voting mechanism that requires a 2/3 majority and is a type of Byzantine Fault Tolerance. The consensus can be thought of as a hybrid with Proof of Stake since Association members must put up considerable capital. And in fact, the Libra white paper states the intent is to move to a Proof of Stake algorithm over time. This remains a tricky problem; Ethereum has been delaying a move to Proof of Stake for years.

Smart Libra

My Mom was a Libra, she was smart. This Libra also intends to be smart, and to support a range of applications. Libra has its own language, called Move, for smart contracts, including the core token creation, accounting, and payments functions. This is a stack-based language with restricted functionality and with a source level compiler, intermediate representation and a run-time environment in a virtual machine to execute bytecode. Initially the intermediate representation, bytecode specification, and VM are available as open source; the compiler is under development.

Move is designed to be safer than say, Solidity, the default smart contract language for Ethereum, which has suffered a number of hacks. Being better than Solidity is not a high bar.

Less flexibility and not being Turing-complete can prevent ambiguity and are thus desirable attributes for smart contracts moving money around. Initially only a predefined set of essential contracts are available, but the intent is to open things up to the developer community over time.

Move will be the development environment for smart contracts implementing a wide range of e-commerce offerings accessed from the Facebook portfolio. The Libra Association will proceed carefully to maintain security. 

Composition of the SDR before the Chinese Yuan was added


But enough of the gory technical details. What is Libra in currency terms and what is it good for? In currency terms it is a basket of strong currencies such as the US dollar ($) and the Euro (€), created with 100% reserve backing in the form of short-term securities (bills) and cash deposited in bank or brokerage accounts. It appears that the initial currencies in the basket will also include the UK £ and the Japanese ¥.

The Libra money supply is dynamic. Libra will be created or destroyed (burned) in response to demand. Thus, unlike Bitcoin, its monetary policy is derived from the mix of currencies in the basket.

So it is a stable coin, but unlike other stable coins, it is tied to a currency basket. It looks rather like the Special Drawing Rights (SDR) administered by the International Monetary Fund, but without the Chinese Yuan. Facebook is not allowed to operate in China for censorship reasons, so the Yuan, which is also subject to strict capital controls, is left out of the basket.

Think of it like a money market fund, but the dividends from holding short-term government paper do not go to holders of Libra. They accrue to a separate currency called the Libra Investment Token that is only held by Association members who have staked the $10 million entry fee.

As Corporate money, it is important that it be audited to ensure full reserves are held as backing, otherwise the value could drop below the nominal currency basket value. It may trade at a slight discount or premium in any case.

There are risks with pegging to a basket of fiat money and accepting fiat money that is not in the basket. For example, suppose a banking liquidity crisis, or a crisis of confidence arises, in Italy (as an example), and fears arise that Italy might withdraw from the Euro.  If the Libra Association is holding Euro in Italian banks, seeking higher yields than in Germany, then in this instance they could lose the peg, slip below the nominal value, due to concerns of bank insolvency.

What Could Have Been

The promise of cryptocurrencies includes decentralization, trustless security, immutability, open source access, permission-less participation, autonomous smart contracts, pseudonymity, a tamper-proof monetary policy, and an easy-to-use development environment. 

Achieving such a mix of attributes is difficult. When it has been approached, it has resulted in slow transaction rates and volatility, making the currency unsuitable for high volume transactions or for every-day use.  To address this, the industry has responded by (a) compromising on the ideals of cryptocurrency, accepting less-rigorous variations of the above attributes in order to achieve higher transaction rates, and (b) creating stablecoins tied to fiat currency to address volatility. 

Facebook’s commanding global digital presence can drive adoption and take the cryptocurrency concept to the mainstream. However, Libra compromises on too many attributes of the ideal cryptocurrency to be categorized as anything but a walled-garden Corporate money, and barely a “crypto” currency at that.

Imagine if instead of creating this Corporate money Facebook had:

  1. Created a currency (call it Solar) that association members could mine on supercomputers via Proof of Work, but also any Facebook user could mine on their laptop or phone, and
  2. Established a system that would pay license fees in Solar for data placed into the Facebook platforms, and
  3. Implemented a true blockchain that would secure the ownership of the data for the originators.
  4. The name ‘Solar’ indicates that the currency would be beyond global and eventually be used in colonies on the Moon, Mars and Callisto.

But that wouldn’t be Corporate money, that would be People’s money. That wouldn’t be in furtherance of surveillance capitalism.

Will Lightning Electrify Bitcoin?

Why: Scaling for bandwidth and efficiency

Suppose Bitcoin could scale. Many altcoins were created in the promise of handling more transactions, and with lower fees.

But Bitcoin can scale, and it will, thanks to the Lightning Network which went live in 2018. While small, it is growing rapidly.

Bitcoin is often criticized for lack of scalability, relative to traditional credit card, debit card, and mobile-based payment solutions. Currently it is capable of about 7 transactions per second onto the blockchain, whereas the Visa network can handle tens of thousands of transactions per second.

The implementation of Segwit, separating signature information, has allowed additional transactions to fit within a single block of the blockchain. Segwit was implemented as a soft fork in 2017 and nearly half of transactions currently use Segwit.

Other proposed solutions have included larger block sizes, but these have required hard forks leading to new coins. The overwhelming majority of hash power and of market cap have remained with original Bitcoin.

Bitcoin is in fact worth more than all 2000 plus altcoins combined.

There are many other approaches to scaling implemented by other cryptocurrencies desiring to address the scaling problem. These include non-ASIC friendly mining algorithms, and a variety of consensus algorithms that eschew mining, such as Proof of Stake, and Byzantine Fault Tolerant protocols more generally.

The second most egregious method is the airdrop, the “helicopter money” of the cryptocurrency world. This tends to be worth, in the long run, close to what you paid for it. The most egregious of all is premining, where insiders reward themselves first, while selling a ‘utility token’ that currently has no utility, and may never have, to others in an ICO.

The problem with these easy money solutions is that they can push up transaction rates greatly, but at an enormous sacrifice in security. You want fast transactions, just lower hash difficulty in mining, or eliminate it. Lower difficulty means lower security. And thus, it sacrifices the store of value aspect of their currency. (Think Venezuela or Zimbabwe).

If you want to conduct large numbers of low value transactions, that may be fine. If you lose your Starbucks card, do you worry about replacing it? Probably not. With a credit card, it’s different entirely.

The solutions described above, such as block sizes and different forms of mining or consensus algorithms, are on-chain solutions. The transactions are all on some “original” chain (which may have been a hard fork from Bitcoin).

An alternative way is to keep the Blockchain very secure, but then add off-chain scaling.

What: Payment Channels

Lightning is such an approach with Bitcoin, building payment channels that can handle many transactions within that channel. At some future date, the consolidated transfer of value for the channel is committed as a blockchain transaction.

Back to our Starbucks card. The card accepts fiat currency of a given amount and then is used as a payment channel until the funds are exhausted over some number of days as a result of your mild coffee addiction. The card, or payment channel, can then be topped up with funds added back into the channel.

Wikipedia has a good definition for the Lightning Network as a second layer payment protocol: “It features a peer-to-peer system for making micropayments of digital cryptocurrency through a network of bidirectional payment channels without delegating custody of funds.”

One opens a channel with another party and each makes a funding transaction on the blockchain to establish the channel. The channel can then be used for a series of ‘micropayments’ (not necessarily small, but smaller than the funding amount in the channel) that are handled within the payment channel.

After a few, or very many transactions, the channel may be closed out by either party and the net aggregate balance transferred is recorded onto the blockchain.

For example if I put in 0.3 Bitcoin initially, and you put in 0.2, the channel was opened with 0.5 Bitcoin total. You and I make a series of Lightning-based transactions, possibly all in one direction. (We’ve been betting on the price of Bitcoin at the end of each month, say).

Let’s also say we agreed to close the channel at the end of the year. And suppose, netted out overall, I sent you 0.2 Bitcoin over a number of transactions. In closing the channel we would commit the final balance in a blockchain transaction showing that you now have 0.4 Bitcoin of the original 0.5, and I now have just 0.1 Bitcoin. That closing transaction gets recorded on-chain.

If we wanted to continue to exchange, we would open and fund a new payment channel.

There is fraud protection; each party can monitor transactions over a chosen time interval. The party in error can lose (to the counterparty) their funding transaction or more.

The Bitcoin blockchain is highly innovative triple entry accounting (you, me, and the blockchain keep records) whereas the Lightning Network uses good old-fashioned double entry accounting (you, me).

How: It’s not just Channels, it’s a Network of Channels

The Lightning Network is more than just a set of disconnected bidirectional payment channels, it is a network of richly connected payment channels. Suppose Lionel wants to send a payment to Linda, but they have no direct channel established.

If they each have a channel established with Lee, they can route the payment through him as an intermediary and he may collect a small fee.

Or they can route through several unknown intermediaries. The network will tend to develop hubs with many connections and larger funding amounts, including commercial enterprises.

              Representation of current Lightning Network

Rapid Progress

As of late December, 2018, the Lightning Network looks like the above image. There are 15,000 channels and almost 500 nodes. The carrying capacity is modest at $2 million presently, but the growth is exponential. The node count grew a factor of 4 in the month of November alone!

Who: Enabling software and Payment processors

Applications built on the Lightning Network are referred to as LAPPs.

There are several payment processors that merchants can use to enable receipt of Bitcoin payments via Lightning. These include BTCPayServer, CoinGate, GloBee, OpenNode, and Strike.

Implementations of Lightning Network Software include Lit from MIT Media Labs, LND and Neutrino from Lightning Labs, and Blockstream’s c-lightning.

The Future

The Lightning Network has the ability to go places that Visa, MasterCard, and PayPal cannot reach by enabling micro-transactions across the globe with extremely small fees. It is fraud resistant and has rapid verifiable transfer of the most secure cryptocurrency on the network layer, with eventual settlement onto the blockchain.

As a proof point, a work of art known as Black Swan was recently sold at auction to the < Low > Bidder for only 0.001 Satoshi or 4 millionths of a cent. (A Bitcoin is divisible into 100,000,000 Satoshis).

Another, more typical transaction and proof point was established at an Australian car wash with a transfer of over 1,000,000 Satoshis or about $40 US.

You wanted to buy coffee with Bitcoin? Now you can.

(The gory details: “The Bitcoin Lightning Network: Scalable Off-Chain Instant Payments” J. Poon and T. Dryja, 2016 https://lightning.network/lightning-network-paper.pdf)

Blockchains Could be Vital to National Security

Last year Tokyo hosted a meeting of the International Standards Organization, including a session on blockchain technology to examine ideas around standards for blockchain and distributed ledgers.

A member of the Russian delegation, who is part of their intelligence apparatus at the FSB, apparently said “the Internet belonged to the US, the Blockchain will belong to Russia.” In fact three of the four Russian delegates were FSB agents!

By contrast, Chinese attendees were from the Finance Ministry, and American attendees were representing major technology companies, reportedly IBM and Microsoft among others.

Let’s unpack this a bit. The Internet grew out of a US military funded program, Arpanet, and the US has been the dominant player in Internet technology due to the strength of its research community and its technology companies in particular.

As we wrote in our most recent blog (http://orionx.net/2018/05/is-blockchain-the-key-to-web-3-0/), blockchain has the potential to significantly impact the Internet’s development, as a key Web 3.0 technology.

Blockchain and the first cryptocurrency, Bitcoin, were developed by an unknown person or persons, with pen name Satoshi Nakamoto. Based on email timestamps, the location may have been New York or London, so American or British citizenship for Bitcoin’s inventor seem likely, but that is speculation.

More to the point, the US is the center of blockchain funding and development activity, while China in particular has been playing a major role in mining and cryptocurrency development.

There are many Russian and Eastern European developers and ICO promoters in the community as well. The Baltic nations bordering Russia and the Russian diaspora community have been particularly active.

The second most valuable cryptocurrency after Bitcoin is Ethereum, which was invented by a Russian-Canadian, Vitalik Buterin. Buterin famously met with Russian President Vladimir Butin in 2017. Putin is himself of course a former intelligence agent.

The Russians reportedly want to influence the cryptographic standards around blockchain. This immediately raises fears of a backdoor accessible to Russian intelligence. Russia is also considering the idea of a cryptocurrency as a way to get around sanctions imposed by the American and European governments.

The Russian government has a number of blockchain projects. The government-run Sberbank had initial implementation of a document storage blockchain late last year. There is draft regulation around cryptocurrency working its way through the Russian parliament. President Putin has said that Russia cannot afford to fall behind in blockchain technology.

Given the broad array of applications being developed for cryptocurrencies, including money transfer, asset registration, identity, voting, data security, and supply chain management among others, national governments have critical interests in the technology.

China has been cracking down on ICOs and mining, but it is clear they think blockchain is important and they want to be in control. Most of their government concerns and interest appear to be centered around the potential in finance, such as examining the possibility of a national cryptocurrency (cryptoYuan).

China would like to wriggle free from the dollar standard that dominates trade and their currency reserves. They have joined the SDR (foreign reserve assets of the IMF) and have been building their stocks of gold as two alternatives to the dollar.

China’s biggest international initiative is around a new ‘Silk Road’, the One Belt, One Road initiative for infrastructure development across EurAsia and into the Middle East and Africa. One could imagine a trading currency in conjunction with this, a “SilkRoadCoin”. In fact, the government-run Belt and Development Center has just announced an agreement with Matrix AI as blockchain partner. Matrix AI is developing a blockchain that will support AI-based consensus mechanisms and intelligent contracts.

China’s One Belt One Road Initiative, actually has six land corridors and a maritime corridor. (Image credit: CC 4.0, author: Lommes)

The American military is taking interest in blockchain technology. DARPA believes that blockchain may be useful as a cybersecurity shield. The US Navy has a manufacturing related application around the concept of Digital Thread for secure registration of data across the supply chain.

In fact the latest National Defense Authorization Act requires the Pentagon to assess the potential of blockchain for military deployment and to report to Congress their findings, beginning this month for an initial report.

What is clear, is that blockchain and distributed ledger technology have the potential to be of major significance in national security and development for the world’s leading nations.

We encourage the US government to increase engagement with blockchain and distributed ledger technology. This can include funding research in universities, pilot projects with industry across various government agencies including the military and intelligence communities, the Federal Reserve, and the Department of Energy, NOAA and NASA, in particular.

Also the federal government should pursue standards development under the auspices of the NIST and together with ISO. Individual state governments are also promising laboratories for projects around identity, voting, and title registration.

Information has always been key to warfare. But there is little doubt that warfare is increasingly moving toward a battlefield within the information sphere itself. These are wars directed against the civilian population; these are wars for peoples’ minds. Blockchain technologies could play a significant role in these present and future battles, both defensively and offensively.

References :

DARPA https://www.google.co.th/amp/s/cointelegraph.com/news/pentagon-thinks-blockchain-technology-can-be-used-as-cybersecurity-shield/amp

US Navy http://www.secnav.navy.mil/innovation/Pages/2017/06/BlockChain.aspx

2018 National Defense Authorization Act https://www.realcleardefense.com/articles/2018/05/03/could_americas_cyber_competitors_use_blockchain_for_their_defense_113400.html

NIST https://csrc.nist.gov/publications/detail/nistir/8202/draft




Is Blockchain the Key to Web 3.0?

Web 3.0 has been around as a meme since early in the century. This writer was formerly with the Sun Microsystems Education business and recalls meetings we sponsored over a decade ago, that were attended by academic computer scientists promoting the concept.

And yet it has been slow to take off, and it remains a somewhat fuzzy catch-all concept. So much so that there is no Wikipedia entry! Some people claim Wikipedia has deliberately censored the term “Web 3.0”.

Wikipedia does have a section within the Semantic Web article. And this notes: “Web 3.0 has started to emerge as a movement away from the centralization of services like search, social media and chat applications that are dependent on a single organization to function.”

To my ear, this matches the desires of many in the cryptocurrency community for decentralized services built on blockchain that challenge the centralization of Facebook and others.

Web 3.0 was initially discussed in conjunction with Semantic Web and with agents. John Markoff of the New York Times supposedly coined the phrase.

Tim Berners-Lee has promoted the Semantic Web, where context and meaning are attached to data, and data structures have rich linkages in support of better data integration.

Cambridge Analytica has famously exploited these kinds of linkages in the Facebook environment to influence the U.S. presidential election and the Brexit referendum.

The general idea around Web 3.0 has been the semantic web, along with data mining, AI, and natural language providing a more productive web environment for users, with greater inferencing and intelligence.

Here’s a very simple view of how it relates to Web 1.0 and 2.0:

Web 1.0:  Read-oriented, static

Web 2.0:  Read and write, dynamic, interactive

Web 3.0: Read and write and execute, composite services, integration, meaning and agency, and greater decentralization

Now we see that blockchain and cryptocurrency are beginning to have an impact on the definition of Web 3.0.

Why? Well let us consider some major issues:

  • Net neutrality is dead in the U.S. thanks to the state-corporatist position of the FCC
  • The web is increasingly centralized on platforms such as Facebook, Google, Twitter who derive almost all of the financial benefit from data that users provide
  • Cryptocurrencies and blockchain are proving that decentralization can work in a secure fashion, at least for some significant applications

Cryptocurrencies and blockchains provide the opportunity to restore the Web toward its original vision of a decentralized resource. They provide the opportunity to return control and monetization of data to users, instead of it being concentrated in relatively few large corporations.


Note that the Semantic Web stack shown at right includes trust and cryptography. Well blockchains and cryptocurrencies are built on cryptography and are all about distributed trust. (Sometimes they are called ‘trustless’ but in fact trust resides in the protocols and in the network of blockchain miners, and the developer and user communities more generally).

You can find a presentation here by Ben Gardner on Semantic Blockchains:


Blockchains add trust and proof of work to the Semantic Web’s unambiguous data with connections. Ricardian contracts or smart contracts can be implemented.

The Semantic Web template is linked data plus directed graphs built with RDF triples.

And, I ran across this interesting paper:

“A more pragmatic Web 3.0: Linked Blockchain Data”, Hector E. Ugarte R., 2017. https://semanticblocks.files.wordpress.com/2017/03/linked_blockchain_paper_final.pdf

The author writes “Linked Data is proclaimed as the Semantic Web done right…an incomplete dream so far, but a homogeneous revolutionary platform as a network of Blockchains could be the solution..designed to interconnect data and meaning, thus allow (sic) reasoning.”

The Semantic Web is all about linked data with defined attributes and relationships, e.g. graph structures such as with RDF triples as the data model. One can adapt blockchains, including linked blockchains, to this purpose and add smart contracts to provide reasoning.

A Semantic Blockchain is defined in his paper as “the use of Semantic web standards on Blockchain-based systems. The standards promote common data formats and exchange protocols on the Blockchain…Semantic Blockchain is the representation of data stored on the distributed ledger using Linked Data.”

More broadly, Blockchains allow the ability to build a new Web from the ground up, with name services more fully decentralized and file and compute services layered on top. Identity and services can also be fully decentralized. Security is inherently provided by the blockchain’s peer-to-peer decentralized mechanism.

We believe that blockchain and cryptocurrencies will accelerate the development of Web 3.0 while also helping to refine its definition.

Information Economy 2.0

Bitcoin is a Trillion $ Economy

We often hear that we live in an Information Economy. We have an information-based economy, but we don’t have a pure form of “money as information”. Instead we have a hybrid of digital money and paper money with encoded information such as denomination and serial numbers and engraving details.

Money (Money 2.0, ‘paper’ fiat money) today is mostly information, but the modern monetary system was designed long before the Information Economy. Even so, money is mostly held in digital form, on the ledgers of banks, and as monetary reserves at central banks. Physical currency in circulation is a small fraction of the money supply. So today it is a hybrid. One can argue it is not fully suited to our rapidly evolving information economy.

Steven Mnuchin, Louise Linton, Leonard Olijar

Steven Mnuchin, Treasury Secretary, and Wife Posing as Bond Villains, while Enjoying Dollar Bills at the Bureau of Engraving, While Dreaming of Tax Cuts for Multimillionaires

Bitcoin and cryptocurrencies collectively are Money 3.0, a form of money that is entirely digital, entirely information. Even if you have a physical bitcoin wallet or paper wallet, the money does not reside in the wallet, only the keys! The keys release bitcoin money held on the blockchain.

Trying to separate the blockchain from bitcoin or cryptocurrency is like trying to separate the economy from information in the information economy. The blockchain holds the ledger information, the cryptocurrency powers the economy. The term ‘blockchain’ does not appear even once in Satoshi Nakamoto’s seminal paper for bitcoin and cryptocurrency.  See this OrionX.net podcast discussing Nakamoto’s vision and the Nakamoto consensus algorithm: https://youtu.be/ZLS5P7SYcyI

Today, market participants mostly look at the market cap of bitcoin and other cryptocurrencies, as if they were some sort of equity shares. But actually, they are currencies, or perhaps digital gold, and what is somewhat strangely called ‘market cap’ is actually the money supply for that currency. It is simply the price of bitcoin, times the aggregate number of bitcoins in circulation. Here, in circulation means securely committed to the blockchain through a cryptographic hashing algorithm.

The size of the economy for bitcoin is related not only to the money supply, but also how rapidly that turns over. In macroeconomics this is called monetary velocity. In fact GDP = M2*V where the GDP is equal to the M2 money supply and V is the velocity of that money. It reflects how fast money moves through the system per year.

In the US the GDP is about $19.5 Trillion, the M2 money supply is about $13.7 Trillion and the velocity is about V = 1.42. That is, on average, the money supply turns over 1.42 times per year. In fact the Federal Reserve has been worried that the velocity is too low. It has been dropping steadily, which is a symptom of stagnation.


Velocity of M2 Money: Federal Reserve of St. Louis

For bitcoin the velocity is much higher. It turns over about 9 times a year, V = 9. Today the money supply or market cap for bitcoin is about $121 billion. With a velocity of 9, that translates to a bitcoin economy that is over $1 trillion. It amounts to around 5% of US GDP and more than the GDP of the United Kingdom. Bitcoin is not usually described in such terms, but this is a measure of the vibrancy of the economy for the cryptocurrency.

Many cryptocurrencies have even higher velocities. Bitcoin Cash, which has only been in existence a few months, has a velocity of 26 and a total economy of over $500 billion, similar to the GDP of Sweden. The world economy of cryptocurrencies exceeds $2 trillion. This is more than the GDP of Italy.

Bitcoin and other cryptocurrencies are enabling the Information Economy 2.0, where whole new forms of efficient exchange of value can be implemented with fewer or even no middlemen and at lower cost.

Evolutionary Forks and Dividends

What is a fork?

It is early days in evolutionary terms for cryptocurrency. Bitcoin has not been around even a decade. Ethereum has only been here for a few years. The respective economies of these and other cryptocurrencies have been growing at triple digit percentage rates.

A given blockchain can be thought of as a continuing line of a particular species. A new blockchain, e.g. Ethereum with new attributes is a new species of cryptocurrency. A fork in a blockchain, such as the recent Bitcoin Cash, is also a new species, but perhaps one can say that it belongs to the same genus.

Mayr’s concept of species is that of representatives of the same breeding population. They are in some sense on the same continual chain.

A fork is an evolutionary branch in response to environmental pressure. The pressure arises due to the developing needs of the ecosystem for cryptocurrencies overall and for individual cryptocurrencies.



The pressure that gives rise to evolution in the cryptocurrency ecosystem arises from the need to scale cryptocurrency to higher transaction rates and to more diverse use cases. For example, there is the very general use case of smart contracts, that led to the creation of Ethereum.

How new currencies are created or are forked results from the technological requirements and how those are interpreted and implemented by particular members of the development community. This is a political arena since miners, developers, exchanges, merchants, and other groups have different interests.

We have just had the Bitcoin Cash fork and are now facing possible forks for Bitcoin Gold and Segwit2x (Segwit was adopted without a fork in August).

It is difficult to determine which fork or species will be the most successful in the long run; but the original or main branch can have an advantage. Overall forks can be seen as strengthening the ecosystem as a whole since total value seems to rise after forks. After the Bitcoin Cash (BCH) fork the original Bitcoin (BTC) increased in value, and one could also collect the BCH on a one per one BTC held basis as a dividend. 

More generally, this has been borne out by the continually increasing market capitalization of the set of cryptocurrencies, currently having reached around $160 billion (roughly a Buffet plus a Gates).

For investors in cryptocurrency one can view forks as special dividends. Those who held Bitcoin through the Bitcoin Cash fork received a dividend of several hundred dollars per BTC. Sometimes numbered prints or copies are valuable as well.


Above is not our view, but that of @BitcoinWrld

What you do (hold, sell all, sell half) with your dividends is up to you and your views on individual forks; we make no recommendations here. But the dividends are there to receive, along with possible capital appreciation as the cryptocurrency economy continues to grow rapidly.

Ethereum: Smarter than a Fifth Grader?

Ethereum is described in Wikipedia as an “an open-source, public, blockchain-based distributed computing platform featuring smart contract functionality“.

How does it differ from Bitcoin? Well Bitcoin is open-source, public, distributed, and block-chain based. The difference is principally found in the terms “computing platform” and “smart contract functionality”. And there are other differences as well.

Ethereum is only two years old. It was the brainchild of wunderkind Vitalik Buterin, a Bitcoin developer, and while initial funds for the project were raised in mid-2014, the network went live in mid-2015. A foundation under Swiss law manages Ethereum.

The motivation was to have better scaling than Bitcoin, both horizontally, in terms of transaction speed, and vertically, in terms of use cases supported (implemented via smart contracts). It also has a better specified development plan, with 0, 1, and 2 versions of the software having been implemented, and version 3 (Metropolis) currently in testing.

It has been a great success, and Ether, the coin of Ethereum, now has the number two market cap among all cryptocurrencies at around $29 billion. Its value has risen dramatically during 2017, rising from $8 to $300.



Ethereum logo CC-BY-3.0


There are two types of accounts in Etherland. One can have a regular cryptocurrency account, or an account can represent a smart contract. There is a virtual machine (EVM) that is said to be “Turing complete” and that supports multiple scripting languages in which contract rules can be specified.

The idea of smart contracts has been around for over two decades; blockchain with broad programmability on the chain provides a very useful technology for their implementation.

Smart contracts allow value to be exchanged between agents without existing trusted relationships. Sort of like escrow, but much more streamlined. The basic idea is to cut out the expense and complications associated with middlemen.

Use cases being explored for such smart contracts include:

  • Real estate leases or purchases
  • Securities settlement
  • Supply chain management
  • Governance, including voting
  • Intellectual property protection

The number of currently existing use cases is few at present, however, and they tend to be simple and related to the Ether coin itself. Some have argued that smart contracts are much harder to implement in practice than many imagine. A recent interesting one is Prism Exchange, which allows you to hold a variety of altcoins across multiple exchanges from a single application.


Ether is much quicker to mine than Bitcoin, and can process 25 transactions per second. Transaction fees are also much lower than Bitcoin, around 8 times lower currently. Blocks are generated every 12 seconds, as opposed to the 10 minute target with Bitcoin.

Like Bitcoin, Ether is mined via Proof of Work, but the intent is to move to Proof of Stake (some measure of ownership) over time. A different cryptographic hash problem, Ethash, is solved, and with this hash Ether does not benefit greatly from mining with ASICs and is therefore accessible to CPU and especially to GPU mining. “Ethash PoW is memory hard, making it basically ASIC resistant.”

Basically the algorithm is designed to consume memory bandwidth and to be GPU-friendly. So it is good news for Nvidia and AMD and Intel.

Enterprise Ethereum Alliance

The Enterprise Ethereum Alliance has grown to over 150 organizations as members and includes some of the most important technology companies and largest banks. Its purpose is to address enterprise requirements for smart contracts and blockchains. The founding members are shown in the graphic below. Mastercard and Cisco are two major companies who have also joined recently.

Banks, in particular, have interest in permissioned blockchains, so that they can retain control of their customer relationships. There is a natural tension between open distributed trust of the blockchain and centralized trust that banks provide today.

It is an exciting time. How blockchain will be deployed by the financial industry, and how it will disrupt the industry are open questions. Smart contracts allow blockchain to be even more disruptive because they provide the tools for disintermediation. Jamie Dimon may not want his traders to trade Bitcoin, but he sure wants a seat at the Ethereum “smart contracts” table.


J-Coin Prediction: it will be a Bonsai among alt-coins

One of the largest banks in Japan, Mizuho, along with other Japanese banks is looking to get into the blockchain game. CNBC reports “Japanese banks are thinking of making their own cryptocurrency”.

Except they are not, based on the information released so far. This will be mobile Yen, a use of blockchain to allow mobile users to spend Yen and send Yen. Mobile money. Not that there is anything wrong with mobile money, an electronic wallet, it can be quite useful.

This is not Nakamoto consenus, this is not mining of currency. It is a tethered currency. This is not an open source, globally distributed ledger with trust resident in the algorithm, the ledger, and the community.

I was married to a Japanese lady for over a quarter century, and have lived and worked in Japan. I know the Japanese mindset. This will be a highly constrained ‘currency’.

No doubt with all the constraints, and as a complete tether to the Yen, and with large banks behind it, they will be able to gain Japanese government approval.

Bonsai, courtesy of http://www.japanexperterna.se/

But I do not expect this to be a true cryptocurrency. It will require a permissioned ledger, controlled by central authorities, the large banks.

Cryptocurrency wants to be free, wild, and out of the box. Satoshi’s vision is more along these lines:

Courtesy of JoJan, CC-BY-SA-3.0

Jamie Dimon must be kicking himself. “J-Coin”, why did I not think of that?