Coinbase makes another acquihire. BTC China drops its fees (again). Three new ventures launched or announced funding yesterday, including BitX in Singapore, SurBitcoin in Venezuela, and BlockTrail in Russia. And it’s time for a long overdue post on Chain, one of my new favorite companies in bitcoin…mostly because they appear to operate outside of Ben Lawsky’s eventual reach.
One of the most interesting new ventures in Bitcoin right now has to be Chain, a block chain infrastructure as a service company in SF. If bitcoin is compared to TCP/IP, Chain and it’s open-source API could very well be bitcoin’s analog to early web browsers. The team is focused exclusively on building developer-friendly tools that make new product development on top of the block chain more manageable. The company wants to make it easier for the kid in his college dorm to churn out products without worrying about investing days or weeks fiddling with the raw Bitcoin core.
If BitPay and Circle are considered the top pure play services challenging Coinbase for supremacy in merchant services and hosted consumer wallets respectively, Chain appears to be the most formidable challenger to Coinbase (and Blockchain) on the developer API / SDKs front to date.
The company hasn’t been around that long, but I’m intrigued by Chain’s position as a pure-play software company with little to no exposure to the usual Bitcoin regulatory pressures. I have to imagine that it’s easier to churn out valuable, slick features like iOS bitcoin fingerprint signatures when you don’t have to worry about legal budgets and money transmitter licenses. And it’s hard to lose money to fraud, when you don’t actually touch customer funds or process transactions.
With permission, I’ve reposted the company’s post from today on how to solve the double spend / 0-Block confirmation riddle. I don’t normally carbon copy company posts, but this one struck me as particularly interesting. I’ll let you decide whether that speaks to my technical naivete or quality of their API…
Chain Research: 0-Confirmation Transactions
The average time it takes for a bitcoin transaction to be confirmed in the block chain is about 5 minutes (blocks are mined on average every 10 minutes). However, there is a high degree of variance, and receiving a single confirmation can take up to an hour in some cases. This poses a challenge to merchants who wish to accept bitcoin and deliver goods immediately. This articles introduces our research into using aggregated network statistics to provide confidence levels for unconfirmed transactions.
It should be noted that there is a theoretical chance of transactions becoming invalid even after a block confirmation. A detailed analysis of post-block confidence is outside the scope of this article, but can be found in articles like Rosenfeld.
To provide context for why we need unconfirmed transaction confidence, consider the following scenario. Imagine an unscrupulous person created a double spend wallet. This wallet acts maliciously in that it keeps a list of disjoint bitcoin nodes and uses the disjoint nodes to propagate double spends. The attacker could use this imaginary wallet when purchasing a cup of coffee. At the time he pays for the coffee, he also sends two transactions to two disjoint bitcoin nodes. One transaction will pay for the coffee and the other transaction will pay his utility bill. Because he will receive the coffee before the transaction is confirmed, he hopes that the coffee transaction is rejected and the utility bill transaction is confirmed. Thus, he has paid his utility bill and left the coffee vendor with an invalid transaction.
Chain engineers have been thinking about this problem and in particular what data we can expose to our customers to solve it. Part of our solution, which we are introducing today, involves adding two new fields to our transaction object:
Propagation level
Double spend
Propagation level represents the percentage of nodes in the bitcoin network that have accepted a transaction. Assuming there are 1,000 bitcoin nodes running, and 500 of those nodes have the transaction in their unconfirmed memory pool, then the propagation level of the transaction would be 0.5.
When a transaction has a propagation level of 1.0, all bitcoin nodes in the network have accepted the transaction into their memory pools. Since bitcoin nodes reject transactions which attempt to double spend an output, a high confirmation level correlates with the probability that a transaction will be successfully mined. Moreover, a low propagation level can be used to alert merchants of the risk involved in transferring their goods and services.
We indicate that a transaction has been double spent if we find at least two transactions consuming a particular output but with different hashes.
Here is a demonstration of how to leverage this new data to report the confidence of a newly created transaction:
[I’m not reprinting the code, nerds. Check out their blog post for details.]
To provide this data in real time, Chain operates a cluster of processes which crawl every node in the bitcoin network. Using our map of nodes, we query each node on an interval to read the unconfirmed transactions from the memory pool. Aggregating this data gives our API the ability to report the propagation level and double spend attempts.
This experiment marks our first step towards providing new information using aggregated block chain data. We are working on adding even more powerful data to provide further confidence in the near future, so watch this space to follow our research. In addition to Chain’s data aggregation solution, there is also the notion of Pre-broadcast blocks.
We are excited about both solutions and are working towards delivering the best possible experience to developers. If you have use cases or ideas on this research - or if you’d like to come work with us on problems like this - drop us a line!
hello@chain.com
Group to Watch
College Crypto Network (@CollegeCrypto)
Back in February, CCN launched with three student chapters dedicated to promoting blockchain education and development at schools across the globe. Today they have 50 chapters, not to mention some serious corporate sponsors. If you are interested in sponsoring student bitcoin initiatives, let me know. I’m helping these kids fundraise because they are the real deal. Visittheir site to learn how you can help or check them out at the North American Bitcoin Conference!
Today’s Tid Bits
Bitcoin’s Price Sinks, but Causes Little Alarm Among Traders
http://dealbook.nytimes.com/2014/08/18/bitcoins-price-sinks-but-causes-little-alarm-among-traders/
On Monday, Bitcoin’s price briefly plummeted to $309 on BTC-e, “an exchange with shadowy backing” according to the NYTimes. That collapse or “flash crash” was short-lived and the price recovered to trading around $460 late Monday, during the time of writing bitcoin is trading around $480. Bitcoin’s price has been steadily falling in recent week, but as Barry Silbert, CEO of SecondMarket Holdings Inc., puts it “This is just how Bitcoin trades, for better or worse…This is normal.”
Coinbase Acquihires Block Explorer Service Blockr.io
http://www.coindesk.com/coinbase-acquires-block-explorer-service-blockr-io/
Blockr.io, popular block explorer service, has been acquired by Coinbase. Coinbase, the San Francisco-based bitcoin financial services startup offers merchant processing, vault storage, consumer wallet hosting, and now a block explorer service. The team of Slovenia-based bitcoin enthusiasts who founded Blockr.io will join the Coinbase team, and will work to continue to develop Coinbase’s API and Coinbase’s own bitcoin mode. The details of the deal have not been disclosed.
BitX to Expand Further in Emerging Markets with New Funding Deal
http://www.coindesk.com/bitx-expand-further-emerging-markets-new-funding-deal/
BitX, an emerging market-focused Singapore-based bitcoin services firm, has completed an $824,000 (SGD$1m) seed funding found. Investors included Barry Silbert’s Bitcoin Opportunity Corp, Julie Meyer founder of Ariadne Capital, and Palto-Alto based financial innovation investor, Carol Realini. The company plans to use the funds to further international expansion. BitX recently partnered with South African payment provider PayFast, enabling over 30,000 merchants to accept bitcoin, and plans to continue to launch services in more markets soon.
Why I Backed a Bitcoin Startup by Julie Meyer
http://www.forbes.com/sites/juliemeyer/2014/08/19/why-i-backed-a-bitcoin-start-up/
Julie Meyer founder of successful venture capital firm, Ariadne Capital, wrote a piece for Forbes explaining why she invested in BitX. Meyer provides a brief history on financial systems and goes on to describe bitcoin as being a part of a “new financial order.” She is bullish on the currency; especially with regard to it’s potential in emerging markets. Meyer concludes by emphasizing, “innovation always wins,” and by claiming that in five years bitcoin and BitX will help banks “re-intermediate themselves… [after] being massively digitally disrupted.”
SurBitcoin Launches First Bitcoin Exchange in Venezuela
http://cointelegraph.com/news/112297/surbitcoin-launches-first-bitcoin-exchange-in-venezuela
The first bitcoin exchange platform in Venezuela, SurBitcoin, launched on August 15th during the Impact Hub Caracas Bitcoin conference. New-York-based brothers Kevin and Victor Charles, who estimate that 70% of Venezuelans are unbanked, founded the company. SurBitcoin promises to take “money-laundering regulations into account,” and work with the Venezuelan government (who has yet to take a position on Bitcoin) in order to help bitcoin spread in the country’s economy. SurBitcoin will be using BlinkTrade’s open source exchange platform to run its exchange.
Russian Tech Magnate’s First Bitcoin Project Launches in Beta
http://www.coindesk.com/russian-tech-magnates-first-bitcoin-project-launches-beta/
Lev Leviev, Russian tech magnate and co-founder of VKontakte, Russia’s largest social network, has launched his first bitcoin project, BlockTrail. BlockTrail is a block chain visualizer where bitcoin user’s can keep track of transactions and offers a social component that links wallet addresses to websites that mention them. The bitcoin data and analytics service will be offered free of charge in hopes that it will compete with other bitcoin analytic startups such as TradeBlock and Coinalytics.
BTC China Launches iOS Apps, Reduces Fees
http://www.coindesk.com/btc-china-launches-ios-apps-reduces-fees/
Bitcoin exchange, BTC China has re-launched the iOS version of its mobile exchange app. The app is aimed at traders, offering a live candlestick, market depth and trade history charts. BTC China is also awaiting Apple’s approval of the company’s wallet and person-to-person bitcoin trading app “Picasso.” BTC China has also reduced transactions fees for sending bitcoins to an external address from a Picasso wallet to 0.0001 BTC from 0.0005 BTC.
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