Bitcoin Payments Are Being Bulldozed for Political Reasons

The Political Reasons Why Important Bitcoin Payments Plumbing Is Being Bulldozed

Bitcoin Core wants to distance itself politically from the former project leader Gavin Andresen, the payment protocol BIP070 he was involved with, and from the BCH-friendly Bitpay payment processor company. The attempts to remove software associated with Gavin Andresen are now having real-world effects on the security of bitcoin payments.

Also read: How to Prove Ownership With a Bitcoin Cash Address and Digital Signature

Bitpay Forced to Remove BIP070

Bitpay keeps getting criticized for implementing a payment protocol requirement for wallet apps looking to send money to a Bitpay BTC or BCH address. Bitpay quite suddenly implemented the requirement without much debate and no public negotiations with other community members.

Bitcoin Payments Are Being Bulldozed for Political Reasons

The initial instinctual reaction among many BTC and BCH users was that “no (single) private company should be allowed to make demands about mandatory changes to all BTC and BCH wallet apps because that would mean that software change decisions would be decided in a centralized manner which would be unacceptable for a currency that’s supposed to be decentralized.” But that reasoning only works superficially and stops working if you spend some time to think more deeply about it, and here’s why:

The Payment Protocol was not created by Bitpay. It was created by the individuals (independent from Bitpay) Gavin Andresen and Mike Hearn back in July 29, 2013, long before Bitpay announced on Nov. 28, 2017 that they would start requiring wallet apps to use the Payment Protocol when sending money to Bitpay. Many major BTC wallet apps had already implemented Payment Protocol support independently from Bitpay – “If you are using the BitPay, Copay, Mycelium, Bitcoin Core, Airbitz, or Electrum wallets for your bitcoin payments, nothing will change. These true bitcoin wallets all already ‘speak’ Payment Protocol” – and before Bitpay made their announcement that they would start requiring Payment Protocol compatibility in the coming months.

The major reason why Bitpay announced they would start demanding Payment Protocol compatibility from all wallet apps that would like to send money to Bitpay was that they started getting a lot of customer support requests from their users who had accidentally sent money to them with a transaction fee so low that their transaction either got delayed for days, sometimes weeks or even rejected by the BTC network, typically after a several weeks long delay.

The Payment Protocol would remove the ability for the Bitpay customer to choose the transaction fee and give that decision to Bitpay instead. Bitpay would specify a transaction fee high enough that they would be reasonably confident that they would eventually receive the money in a reasonably timely manner, thus heavily reducing the number of customer support tickets generated.

Bitpay did not try to start centrally controlling “the rules of Bitcoin.” They just saw a harmless way to reduce their customer support department costs and announced their necessary requirement to accomplish that goal more efficiently.

The Bitcoin Core project added a “deprecation warning” message for their BTC wallet in their documentation site on Nov. 22, 2018:

Bitcoin Payments Are Being Bulldozed for Political Reasons

(Screenshot created from here, Archived versions; Deprecation warning, Archived versions here and here.)

No clarification has been given on why the BIP070 Payment Protocol is now considered “deprecated and will be removed in a later version of Bitcoin Core” because “The protocol has multiple security design flaws and implementation flaws in some wallets,” at least not on the Bitcoin Core documentation site since Nov. 22, 2018 until May 7, 2019. Maybe it’s just a matter of their documentation being poorly updated or maybe it’s because BIP070 actually works well enough to not have to be deprecated.

The latter reason seems more likely because Bitcoin Core (BTC) advocates have been politically hostile against Bitpay and especially so after Bitpay announced that they have started supporting BCH in addition to BTC.

This seems to be a political move to signal that Bitcoin Core should make the important decisions about how payments should be made and not a BCH friendly company such as Bitpay.

BIP070 was authored by two BCH friendly individuals (“Satoshi’s second in command” and former Bitcoin Core project leader Gavin Andresen and Bitcoin XT founder Mike Hearn) whereas the now suggested Payment Protocol BIP021 was co-authored by the well-known Bitcoin Core and small base blocksize limit advocate and developer Matt Corallo.

Bitpay could’ve chosen to mandate the significantly older Payment Protocol BIP021 (created Jan. 29, 2012) instead of mandating the newer Payment Protocol BIP070 (created July 29, 2013). For whatever reasons, Bitpay chose the newer standard BIP070. Bitcoin Core implemented support for BIP070 all the way back on March 19, 2014 as can be read in their release notes: “Add payment request (BIP 0070) support.”

It’s odd that the Bitcoin Core project implements the newer standard BIP070 and then many years later deprecates the newer standard in Bitcoin Core and starts suggesting that everyone should be using the much older standard BIP021 that even Bitcoin Core themselves did not choose initially. It’s odd unless you consider the politics between the competing Bitcoin variant currencies, BTC and BCH, in which case the events start making sense again.

Bitcoin Core wants to distance itself politically from BIP070, the former BCH-friendly Bitcoin Core project leader Gavin Andresen, and the BCH-friendly Bitpay payment processor company. Bitcoin Core advocates state the reasons as being: “The protocol has multiple security design flaws and implementation flaws in some wallets,” without clarifying those reasons, when in fact their reasons are clearly politically motivated as has been argued in this article.

The currently most widely accepted, supported and endorsed BTC and BCH Payment Protocol BIP070 works well enough for now (see graph below), even though mandating its use was decided by the BCH-friendly payment processor company Bitpay and not by the current project leader of the now BTC maximalist Bitcoin Core project. It makes sense to keep endorsing and supporting BIP070 at least until a better standard has been developed and its merits have been well argued and thoroughly debated within the BTC and BCH communities. The older BIP021 standard does not seem to be better than the newer BIP070 standard.

Bitcoin Payments Are Being Bulldozed for Political Reasons
Source: Bitpay

The best counterargument to enforce the use of BIP070 for wallet apps was arguably given by Andreas Antonopoulos, and Bitpay motivated their enforcement convincingly in this excellent summary: “Near the end of the video, Andreas pointed out that people are using third parties to unwrap the BIP-70 protocol to get to the BIP-21. This creates additional security concerns for BitPay users by introducing additional trusted parties. This point is not only valid, but, if our sole and primary motivation for enforcing BIP-70 was about security, would present a compelling case to roll-back enforcement until more of or all of the Bitcoin ecosystem adopted Payment Protocol. But as we said before, BIP-70 is not only about security for BitPay, but about usability. And the usability of cryptocurrency is not just about the short-term success of BitPay, but also the long-term success of cryptocurrency.”

Andreas talks about “The BIP-70 controversy.” He reads a question that was submitted by one of his viewers. The viewer says “Samurai wallet for example does not support BIP-70 and refuses to implement that feature. Could you explain why BIP-70 is controversial in itself and why Bitpay implements a non-universal BIP? Do users have a role to play in this controversy?”

It’s easy to understand why the Samurai wallet team refuses to implement and support BIP-70. They endorse the Bitcoin Core (BTC) currency above all and consider any other competing cryptocurrency, BCH especially, as “an attack on Bitcoin.”

The Samurai wallet team tweeted that they approve of Bitcoin Core advocates “viciously attacking” Bitcoin Cash advocates and that Bitcoin Cash advocates are “lunatics” and “frauds.” That’s a pretty strong choice of words to describe a group of people that have a difference of opinion regarding how Bitcoin should scale.

“Bitcoin will not bend the knee for you, your business, or anyone else. Bitcoin will not compromise. That’s a feature not a bug. You lunatics forked yourself off, now you can deal with the consequences and the ‘vicious attacks’.” And then this comment: “Forking is not the issue. That is exactly what they should have done. The ongoing narrative that ‘BCH is Bitcoin’ is the problem and should be ‘viciously attacked’ or at least highly ridiculed. If you don’t call out fraud, you yourself are a fraudster.”

It’s About Politics, Not Technology

It should not come as a surprise then that the Samurai wallet team refuses to support the BIP-70 technology that the Bitcoin Cash-friendly payment processor Bitpay started requiring from all wallet app providers. It’s about politics, not about technology. Andreas too has become a Bitcoin Core advocate so it’s not a surprise that he omits mentioning that the Samurai wallet team is not a typical example of a politically neutral wallet team. He just pretends that the person who asked the question in his video is right about the Samurai wallet team being politically neutral.

Andreas Antonopoulos further says (regarding Bitpay’s choice to make the use of BIP070 mandatory for all of their customers) at 6:04 in his video that: “From a certain perspective I think that makes sense. However it’s created a lot of pushback … leading in fact to the emergence of alternatives and competitors to Bitpay with projects such as BTCpay Server.”

Notice how Andreas says it’s the reason and not a reason that people started competitors to the Bitpay company. That’s not a very honest description of the events now, is it? Bitpay requiring BIP070 is just one reason among many reasons that people started competing companies. The two most major reasons are that 1) people start competing companies in growing ecosystems all the time, and 2) Bitpay was one of the earliest and most influential community members that publicly advocated raising the base blocksize limit for the Bitcoin currency before Bitcoin split into Bitcoin Core (BTC) and Bitcoin Cash (BCH) on Aug. 1, 2017. This is what Stephen Pair (co-founder and CEO of Bitpay) wrote all the way back on Jan. 7, 2016 about Bitpay’s political stance regarding the blocksize limit debate:

“Miners need a simple, but adaptive consensus rule for determining the block size limit. Of all the ideas we’ve examined, the one that seems most appealing is a simple adaptive limit based on a recent median block size. To determine the block size limit, you compute the median block size over some recent sample of blocks and apply a multiple. For example, you might set the limit to 2x the median block size of the last 2016 blocks … At BitPay, we will experiment with this approach. We will perform back testing to analyze what impact various settings might have on historic blocks. We will also analyze behavior under extreme circumstances and critique it from a game theoretic perspective. You can follow our work with our fork of the bitcoin client: https://github.com/bitpay/bitcoin. If our findings convince us that it is the best approach for Bitcoin, we will work to convince others (most importantly, miners) as well. In the meantime, if miners reach a consensus on a temporary bump in the fixed limit, you’ll be able to spend those coins at any BitPay merchant.”

As you can see, it’s no wonder Bitcoin Core advocates view Bitpay as being a very influential and important competitor to the scaling roadmap that the Bitcoin Core team fought and keeps fighting for.

Interestingly, it just so happens that Amaury Sechet (project leader of Bitcoin ABC) is advocating a very similar long-term solution to deciding the base blocksize limit for Bitcoin Cash. Bitcoin ABC stands for “Adjustable Blocksize Cap” and Bitcoin ABC’s base blocksize limit previous increases from 1 MB to 8 MB, and then to 32 MB have been merely short-term solutions while the long-term solution is still being researched and worked on. Amaury (“Deadalnix” on Github) wrote this on Jan. 6, 2019, almost exactly three years after the above mentioned Bitpay blog post:

“Given the goal of keeping the system secure without running while keeping the [base blocksize] limit above actual use, I would chose the parameter of the adjustment using the largest value of these two computations:

1/ the median block size of the last 11 block multiplied by 2.

2/ the average block size over a large duration (I’m not sure what’s a good value at this time).

Rationale: We want to avoid the usage to run into the block size. To do so, it is important to adapt quickly in case of rapid change in usage. We also desire to keep multiplier small as we want to reduce the attack surface. It follows that a small window (11) and a small multiplier (2) fits the bill best. 11 is considered safe from manipulation and used for other computation like MTP for that reason.”

Notice the striking similarity between Bitpay’s and Amaury’s preferred long-term solutions to the base blocksize limit for BTC and BCH. Great minds seem to think alike. It’s no wonder that Bitpay announced (March 28, 2018) that they would support BCH in addition to BTC for their payment services: “BitPay Merchants Can Now Accept Bitcoin Cash Payments.” Bitcoin Cash (BCH) is simply more Bitcoin than “Bitcoin.”

Where do you stand on this debate? Share your thoughts on the subject in the comments section below.

This post was written by Tomislav Dugandzic, independent bitcoin cash (BCH) user and currency speculator.

OP-ed disclaimer: This is an Op-ed article. The opinions expressed in this article are the author’s own. Bitcoin.com is not responsible for or liable for any content, accuracy or quality within the Op-ed article. Readers should do their own due diligence before taking any actions related to the content. Bitcoin.com is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any information in this Op-ed article.


Images courtesy of Shutterstock, Github, Bitpay, Stephen Pair (Twitter).


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Eight Reasons to Use Cryptocurrency Payments in 2019

Op-Ed: 8 Reasons to use Cryptocurrency Payments in 2019

This article on cryptocurrency payments was written by Thomas Highwater, who is an avid fan of all things crypto-related. Mr. Highwater teaches high-school level robotics and programming.

***

While there is a growing number of fiat based-payment processors with a variety of practical tools and methods of payment, adding cryptocurrency payments into the mix provides consumers and merchants with unparalleled benefits. Some of these benefits include simplicity, lower overall cost, security, privacy and a greater level of control over one’s funds. 

Reasons to Use Crypto Next Year

Also read: Wendy McElroy: Avoiding Fraud by Going Crypto-Anarchist

Cryptocurrencies are numerous and versatile and can be utilized as entirely private bank accounts and payment cards for almost any occasion. They offer a multitude of ways to earn a form of interest with little or no effort and help users protect sensitive data and holdings on the go 24/7.

1. Fees

There was a time, not that long ago, when cash was king and financial institutions gave generous incentives to people who chose to put their cold hard cash into institutional coffers. Today, bank accounts of all sorts, as well as debit and credit cards, have fees associated with them — money that goes down the drain and provides no benefit, never mind interest earned. There are debit and credit card fees, ATM fees, merchant fees, checking account fees, overdraft fees, paper fees, check fees, transfer fees, change fees, charge-back fees, foreign transaction fees, minimum balance fees, inactivity fees, false decline fees, et cetera, et cetera.

In comparison, popular cryptocurrency payment gateways like Bitpay and Coinpayments charge between 0.5 perecent and 1 percent per transaction. In most cases, a cryptocurrency account in the form of a digital wallet is entirely free and unless one chooses to invest in cryptocurrency hardware wallets or prepaid cards, other than the transaction fee, using cryptocurrency as money costs absolutely nothing.

2. Sensitive Data

Banks and credit institutions, as well as retailers and service providers, obtain and retain too much of their customers’ personal and financial information. Details including our name, address, employers, social security number, net worth, assets, investments, account balances, credit score, credit line, and transaction history, along with everything we do and buy, who we associate with, when, where, etc. comprise our personal, professional and financial data sets. With traditional financial institutions and traditional fiat currency, we can no longer preserve our privacy. 

Cryptocurrency transactions provide an alternative by limiting the amount of transaction data to mere numbers also known as cryptocurrency wallet addresses and transaction IDs confirming that a wallet-to-wallet transaction took place. A cryptocurrency payment processor acting as a third party will typically require your name (and shipping address for the delivery of physical goods), but the rest of your information will remain private as long as you don’t connect your bank or credit card account and transact solely in BTC and altcoins.

3. International Use

Cryptocurrencies are a borderless means of exchange allowing for instant and cost-effective transactions across the world. There is no waiting, no international fees and no limitations as to who can or cannot send funds to whom or when and where those funds can be accessed. All that is needed is an internet-enabled device like a cellphone and someone without access to a banking institution is given an alternative solution with which they can pay bills, earn income, safe-keep their funds, make purchases and conduct business.

Using cryptocurrencies while traveling adds an extra layer of security and can be used as a remote source of emergency funds that can be accessed without an ID, a bank account, credit cards, a wire transfer or even a personal computer device.

4. Ecommerce

Accepting cryptocurrency online has never been easier. Shopify and Etsy merchants can select to accept BTC, BCH, and altcoins. Woocommerce and Easy Digital Downloads vendors can use WordPress plugins like Mycryptocheckout for the purpose. And then there’s Shapeshift which gives customers the choice to pay with dozens of cryptocurrencies. Shapeshift is integrated with cryptocurrency payment processors like Bitpay and Coingate, and cryptocurrency wallets like Coinomi and Keepkey.

Moreover, there is Purse.io, an online platform where users can buy items from Amazon with cryptocurrency and it is also integrated with Shapeshift, as are Magento and Openbazaar. Setting up cryptocurrency payments is super simple and quick and merchant transaction fees are 60-70 percent lower compared to fiat transaction fees.

5. No Charge Backs

Unfortunately, there are customers who make a purchase, receive the items they ordered and, perhaps, even use them only to cancel their payment. They can do this because fiat payments are not instant.

With cryptocurrencies, things are quite different. Once a transaction has occurred, there is no turning back. Funds ‘travel’ from one wallet to another, the transaction is recorded and it cannot be reversed. This is not to say that a customer cannot return an item and request a refund by communicating directly with the vendor. Of course they can. What they cannot do is place an order, pay for it, receive it and then get the sum they paid back on their account because of money back policies overseen by online payment processors and credit card companies.

Charge backs are meant to prevent fraud and yet they often accomplish the very opposite. In this instance, cryptocurrency works the same way as cash. After you’ve taken the item you paid for with cash, you can’t go back to the store with a damaged or used item, never mind empty-handed, and demand your money back.

6. Mobility

Mobile payments have become all the rage. Being able to use a smartphone in place of a credit card is awfully convenient.

From Paypal and Apple Pay to Mastercard’s Paypass and Visa’s Paywave with near-field communication (NFC) technology and modern POS terminals, getting the check has never been easier. And yet the same privacy and security issues arise as with the rest of traditional, fiat-based financial transactions, namely too much data in one place. All currently available mobile fiat payment processors store credit card information which include all of our financial information and more. Not to mention that all that data is online and on our mobile devices everywhere we go.

Cryptocurrencies are a safer digital cash option and are ideal for mobile payments by default due to their virtual, decentralized nature.

7. A Growing Market

Bitpay, one of the most successful crypto payment gateways, is processing $1 billion worth of transactions annually at a rate of a quarter million transactions per month. Coinpayments already serves millions of vendors in 200 countries and has just integrated with Bittorrent to give its 100 million users the option to pay with BTC and altcoins. Coingate serves 50,000 merchants and has processed hundreds of thousands of cryptocurrency payments, and Utrust just partnered with Payrexx and its 10,000 European merchants.

More integrations and partnerships between cryptocurrency payment processors and fiat payment processors are in the works and the market is expected to grow by 50 percent in the next two years. In particular, Foton announced plans to attract 100 million users by 2020 and offer competitive features including its own stablecoin, fiat pairs, atomic swaps, a loan and escrow service, and a payment card with loyalty rewards and cash back. 

So there is no doubt: millions of merchants all over the world accept cryptocurrencies, as do tens of thousands of websites.

8. Commercial Use

It has been estimated that some 20 million people worldwide own cryptocurrency. Most others have heard of bitcoin and many plan on adding it to their portfolio.

Square, a credit card payment processor serving merchants, employers and mobile payment users, is gradually out-competing Paypal while also increasing its profits through BTC sales. The majority of Square’s merchant customers have expressed interest in accepting bitcoin core and a 2017 Cambridge Centre for Alternative Finance study confirmed that 40 percent of consumers would, indeed, like to be able to make purchases with BTC.

Countries with weaker than average fiat currencies tend to favor the use of cryptos. Turkey, Venezuela, Brazil, Australia and South Africa appear to have large numbers of cryptocurrency users. In fact, a whopping 80 percent of Australians would like to use cryptocurrencies for daily purchases. Merchants in Eastern Europe and small western European towns seem more open toward adding bitcoin as a method of payment. Even before the 2017 cryptocurrency bull market, more than 10 percent of Eastern Europeans reported using cryptocurrency in place of fiat for everyday purchases.

Crypto as Money

Nowadays, almost anything can be paid directly with cryptocurrencies: homes, condos, boats, cars, clothing, electronics, health and pet products, food, wine, accessories, plane tickets, vacations, tools, musical instruments, as well as dating services, professional services, internet services, and, of course crypto gear.

Without pointing out the obvious, let’s look at the most interesting things digital currencies can buy you:

  •  Enjoy a Thai or Indian restaurant in Montreal or have Dutch pancakes in Aruba
  •  Buy vintage furniture in Massachusetts or rent an office in Miami
  •  See the Cerro Negro volcano in Nicaragua or charter a yacht in South Florida
  •  Buy a Benz or a Beamer in California or a Rolex in Europe

The Market According to Experts

In January, a company called Bakkt, owned by the Intercontinental Exchange (ICE) which also owns the New York Stock Exchange (NYSE), will launch bitcoin futures which will be settled in BTC, not cash. Its partners include Microsoft, Starbucks and Pantera Capital. There will be no leverage trading, meaning that actual bitcoin will have to be bought and owned for the duration of the contract. Given that these are institutional investors, BTC’s volume is expected to reach new heights. The CEO of ICE and NYSE chairman Jeff Sprecher stated that digital assets are here to stay and that they “have a future in regulated markets.”

It is evident that the cryptocurrency industry has grown by leaps and bounds in the past 10 years since Bitcoin was born. Fintech is transforming the financial industry and more and more people are getting onboard. Shopping in-store and online is going fully digital but raising cyber security fears, which can be drastically reduced with a broader acceptance of cryptocurrencies as a means of payment.

Do you think payments in crypto will continue to trend? Is this the route to mass adoption? 


Images courtesy of Shutterstock


OP-ed disclaimer: This is an Op-ed article. The opinions expressed in this article are the author’s own. Bitcoin.com does not endorse nor support views, opinions or conclusions drawn in this post. Bitcoin.com is not responsible for or liable for any content, accuracy or quality within the Op-ed article. Readers should do their own due diligence before taking any actions related to the content. Bitcoin.com is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any information in this Op-ed article.

 

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Political Decentralization: Freeing the Internet From Monopolists With Crypto-Tech

This piece on political decentralization was written by Jonas Sevel Karlberg. Karlberg advises several prominent projects and is a co-founder of the Nordic Blockchain Association. He is also the founder and CEO of AmaZix.

***

The internet was born from an ideal for information to be shared by all, with all, and was seen as the archetypal decentralized system. Today, however, commercialization by monopolistic and powerful actors has created a system in which we are shown information paid for by the highest bidders, and can only access what the wealthy and powerful permit. Giant tech companies, big businesses, and even governments now act as sentries who not only control what we can do, but have unprecedented capabilities to watch us do it.

Also read: Four Ways to Commemorate Bitcoin’s 10th Anniversary

This is not how it should be, and it doesn’t have to remain this way. Blockchain and crypto technologies, built on a commitment to achieve democratization and decentralization, offer a solution that could bring down the concentrations of power that currently govern the internet.

A Tarnished Ideal

In its genesis, the internet was a system owned by no one and everyone at the same time. This was a key reason behind its exponential growth — anyone, from anywhere, could create content and share it with the world. In that “Wild West,” neither governmental nor business forces were able to control or restrict the web, its users, or the information on it.

However, while the internet remains physically decentralized, it now depends on large, centralized services to support its critical components, such as web hosting, cloud computing, DNS services, social media, search engines and email services.

Arguably, Google Chrome is among the most popular web browsers in the world — Android smartphones, coupled with the ubiquitous Google Suite, all combine to give Google hegemony over the internet. Indeed, Mozilla’s Internet Health Report 2018 shows that more than 90 percent of internet users use Google Search. Other large companies have a similar presence in other areas, with Amazon dominating cloud storage and Facebook grasping hold of social networking. Part of the reason why these global giants are in this position is their unprecedented ability to observe what people do on the internet, and exploit that information for their own commercial and financial gain.

More sinister is the ability to determine and restrict what consumers can see and consume — search results are prioritized by advertising revenue and filtered by location and government, subtly concealing advertising based on consumer behaviors and demographics. Accuracy, fairness and relevance of information are abandoned in favor of popularity, price and commercial value.

By all means, this betrays the ideals upon which the internet was built. Everything we do is only by the permission of some central entity. Want to buy something online? You can, but only if your bank or payment processor pays the merchant on your behalf. Want to say hello to a friend halfway across the world? Sure, but only if Facebook relays the message for you.

Taking Back Control

First, we must make an important distinction between architectural and political decentralization. The former refers to the number of computers that make up a system, while the latter concerns how many individuals or organizations ultimately control that system. Blockchain and crypto technologies employ both to take control of information away from giant, despotic tech companies and put it back in the hands of users.

In a decentralized system, the internet is a community of users and a network of independent machines that power and host information. This not only removes central hands from the levers of control, but also makes systems more resilient to failures and hacks, while ensuring that there is no element of vulnerability.

Crypto tools already decentralize money transactions, among other things, and will be vital in the creation of a sustainable decentralized internet. They enable decentralized web hosting, while protecting against DDoS attacks by replacing centralized servers with thousands of nodes, each of which constitutes a small part of the website. This is the basis of architectural decentralization, and is a change that must occur, especially given recent notable data breaches.

This in turn enables political decentralization — handing back control of information to users. Distributed ledgers at the heart of blockchain not only protect against data breaches, but prevent companies that store information from using it for their commercial benefit, sharing it with governments, or selling it to third parties without user consent. By storing data across a distributed network, blockchain makes sure that individuals retain ownership of their information. Individuals have a right to own and, if they see fit, keep their information private and determine how it can be used.

A Challenging but Achievable Reality

Decentralization is the way forward, but there are undoubtedly several challenges facing the development of crypto-tech that must be solved if its transformative potential is to be realized.

Scalability is the most significant issue currently facing blockchain systems, and it is limiting mainstream adoption of the technology. Increasing privacy is also vital if user data and information are to be properly protected, given that crypto systems currently rely on pseudonymity, rather than anonymity.

Meanwhile, the biggest hurdle to be overcome is the sluggish adoption of, and familiarity with, the underlying technology. For a decentralized internet to re-emerge, users beyond the blockchain and crypto communities must engage with and support it, without being held back by a misconceived and cynical perception of blockchain.

Nevertheless, centralization cannot sustain society, and the decentralization revolution that has been quietly underway — for longer than you might think – is about to be turbocharged by decentralized technologies. The cryptosphere is bound by its unique ability for communitarian development and a common belief in using technology for the improvement of society. If anyone can make the decentralized ideal a reality, the crypto community can.

Is cryptocurrency-based disruption unavoidable? Do you think we will be able to use encrypted technologies to take back control? How long will it take until the major tech companies no longer control our ability to interact and transfer information online? 


Images courtesy of Shutterstock


OP-ed disclaimer: This is an Op-ed article. The opinions expressed in this article are the author’s own. Bitcoin.com does not endorse nor support views, opinions or conclusions drawn in this post. Bitcoin.com is not responsible for or liable for any content, accuracy or quality within the Op-ed article. Readers should do their own due diligence before taking any actions related to the content. Bitcoin.com is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any information in this Op-ed article.

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Why We Rejected an Offer from Government to Help Expand Our Company

Why We Rejected an Offer from Government to Help Expand Our Company

This story about a rejected government offer was written by Tomas Forgac, friend of Bitcoin.com, early Bitcoin investor and entrepreneur, now focusing on Bitcoin Cash adoption and growth. 

***

An unnamed pro-crypto government recently gave Bitcoin.com an unsolicited offer to finance the expansion of operations. While we are grateful for the trust given to us and the bitcoin cash community, we feel we must explain why we would never accept such an offer. We also hope our decision inspires others in the ecosystem to reject government handouts. 

Also read: US State Takes Action Against Crypto Operation Imitating a Bank

Why We Rejected an Offer from Government to Finance our Company

There is a moral and economic dimension of our decision. The majority of our colleagues, including our CEO, consider taxation aggressive redistribution of honestly earned income: a form of theft. It would thus be unacceptable for us to take taxpayer money through a process we recognize as unjust.

While most people have differing opinions on taxation, hardly anyone considers it appropriate for lower and middle-class folks to invest in a highly risky enterprise. Furthermore, why should the existing financial institutions be forced subsidize their potential competition via a corporate tax? They would never wittingly do such a thing; it would be suicidal. But this is the effect of taxation on the population and businesses.

The Broken Window Fallacy

Government officials have no skin in the game when making investment decisions. Unlike angel investors, it is not their money at stake, and unlike VCs who have to compete for the financing of their funds, governments don’t compete with anyone.

Governments expropriate wealth and redistribute it. Officials and bureaucrats have no incentive to make the right decision. It should suffice to compare the success of startup scene in countries with very little to no support (US, UK, Israel or Scandinavia) to those where a government is heavily involved and “supportive” (EU, Singapore).

Seen Versus Unseen

One of the most important concepts in economics was explained by Frédéric Bastiat in 1848 and popularized by Henry Hazlitt a century later. They expressed this idea as the “disconnect between what is seen and what is unseen.” Bastiat used this idea to dismantle the broken window fallacy: that when a child throws a stone in a merchant’s window, it helps the economy because the merchant needs to hire a window maker.

“This destruction,” says some pseudo-economists, “trickles down to the whole economy and provides jobs to the unemployed.” The fallacy attempts to convince people that wars spur economic activity; that for example, World War II ultimately saved the US from the Great Depression.

Destruction Cannot Lead to Prosperity

Why We Rejected an Offer from Government to Finance our Company
Frédéric Bastiat

Anyone with common sense, however, intuitively knows there is something wrong with this line of reasoning. How can destruction lead to prosperity? It cannot.

Bastiat explained there is a difference between what is obvious and what is unseen. It is obvious the window was fixed and the window maker made money as a result. However, most people miss that the merchant made expenditures, which he would have originally reserved for other purposes.

Perhaps he wanted a new pair of pants made, but because of the incident, he had to forgo those. Therefore, the tailor loses money and society fails to accumulate greater wealth. In the case of the broken window, the economy merely replaced the window. In the latter, unseen case, the merchant would possess an intact window and new pair of pants. Overall, everyone would have been wealthier.

The same goes with the war economy. On paper, it grows rapidly because of government expenditure, but it doesn’t produce stuff people want. That makes the society poorer, not wealthier.

Broken Window Fallacy in the Startup World

Why We Rejected an Offer from Government to Help Expand Our Company

This concept applies to governments making decisions on investments in startups as well. Even if some startups become successful and profitable, it is impossible to say which investments had to be forgone.

This is the natural result of money being stolen from people and businesses through the process of taxation. In reality, these folks would have made the decisions on where their money goes, not government agencies. Some of them might choose consumption, some might choose more profitable investments, and some might choose what they feel is a more socially conscious investment.

It should not be up to government to make judgement calls on investment decisions. This is an insane proposition, because government has no skin in the game. It is unlikely they would make a good decision. The incentives are not there, so businesses and investors would make better decisions on average.

Rejecting Government Handouts on Principle

The author of this article had a similar experience with his first startup attempt in Singapore. Because it was 3D-printing related, he received multiple unsolicited offers for state financing and turned them all down because of the aforementioned reasons.

With that said, we are not naive. We do not believe because we refused the money, it will be returned to the taxpayers or spent in a better way. No, we rejected it on principle. We turned it down because it is stolen money, and we want to educate the public about the unintended consequences of such programs.

Bastiat would be proud.

What do you think about rejecting government handouts on principle? Did the author and his company make the right decision?


Images courtesy of Shutterstock


OP-ed disclaimer: This is an Op-ed article. The opinions expressed in this article are the author’s own. Bitcoin.com does not endorse nor support views, opinions or conclusions drawn in this post. Bitcoin.com is not responsible for or liable for any content, accuracy or quality within the Op-ed article. Readers should do their own due diligence before taking any actions related to the content. Bitcoin.com is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any information in this Op-ed article.

The post Why We Rejected an Offer from Government to Help Expand Our Company appeared first on Bitcoin News.

Op-Ed: To Achieve Mass Adoption We Must Fight for ‘Blockchain Inclusion’

Op-Ed: To Achieve Mass Adoption We Must Fight for "Blockchain Inclusion"

The following piece on blockchain inclusion was written by Alexander Vasylchenko. He is the CEO and founder of Sofitto and the creator of Sugi-Card, which is a cold-storage cryptocurrency wallet. Alexander is also the former CTO of Mycelium, one of the first secure mobile Bitcoin wallets, created in 2013.

Cryptocurrencies have only been around for a decade, but their impact on global and local economies is palpable. Last month, a pilot project launched in Uganda provided 1,000 farmers with cryptocurrency loans. In a country where almost half the population is underbanked, the project allows farmers to buy necessary tools to scale their businesses without depending on banks.

Also read: Bitcoin Isn’t Volatile – the World Is

Toward Mass Adoption
and Blockchain Accessibility

To Achieve Mass Adoption We Must Fight for "Blockchain Inclusion"

But many of today’s cryptocurrency tools do not commit to making blockchain technology easily accessible. Consumer products are still far too technical, placing an overwhelming responsibility on the user to educate themselves on how to navigate this new landscape safely.

A recent report revealed that while 93 percent of British people are aware of Bitcoin, they don’t know how it works. Only 4 percent understand it.

If we are to see mass adoption of distributed ledger technologies, we need to make them as accessible as possible for every person — from unbanked communities in emerging economies to populations with established financial infrastructure. Blockchain inclusion — the idea that the technology will only make a meaningful difference when everyone, regardless of their culture, demographic or technical know-how is empowered to use it — must be the industry’s focus.

From Cypherpunks to New Adopters

The first users of cryptocurrency were technically proficient. They were drawn to blockchain technology’s potential to disrupt the financial, social and political realms.

A nod to the cypherpunk era, Satoshi Nakamoto’s original Bitcoin whitepaper appealed to those who already sought to challenge traditional finance, which in the wake of the 2008 economic collapse had proven that the system was failing. Blockchain’s consensus mechanism was a promising alternative; it effectively withdrew power from centralized financial authorities and shifted trust into a self-governed network built to resist human-driven misconduct.

Due to the rising market price of bitcoin and other cryptocurrencies from 2015 to 2017, we saw the next major wave of users enter the space. While the core philosophy of bitcoin was not founded on promise of financial returns, the initial coin offering (ICO) boom attracted countless new players to the space. Luckily, ICOs now seem to be a thing of the past — their popularity fading as fast as they arrived — giving the industry a chance to shift the focus to its consumers.

The Challenges of a Nascent Technology

To Achieve Mass Adoption We Must Fight for "Blockchain Inclusion"

But for many people, simply storing crypto can be a daunting process, and this hinders its mass adoption. Corporate solutions are, for the most part, years away from being placed in the hands of consumers. Wallets still require technical acumen and are typically inaccessible for making everyday purchases. Online wallets are far easier to use. However, they are not designed with security strong enough to resist hacks or phishing attacks. Usability and accessibility often comes at a great cost to security.

As we now enter a new stage of cryptocurrency adoption, it is up to companies and teams to make the use of crypto as simple and safe as possible. Projects face a number of challenges as they try to blend this nascent, complex technology with both usability and security. While users should take the initiative in educating themselves, the tools and products they use should provide a smooth and effortless transition.

Blockchain is Not Inclusive by Default

In the same way that entire unbanked communities have grown from rigid, traditional banking processes, we run the risk of crypto finance solutions creating an exclusive ecosystem. The World Bank’s Global Findex database estimates that 1.7 billion adults do not have bank accounts. However, more than one billion of these unbanked adults have mobile phones, which opens up an avenue for convenient access to financial services.

Blockchain inclusion depends on the teams building the technology, not their users. In an ideal world, the phrase “build it and they will come” would resonate with us all. The reality is far less encouraging; as with any new technology, it’s the creators and innovators who bear the burden of engineering products that are easily adoptable.

According to the Technology Acceptance Model, user adoption depends upon two core factors: perceived usefulness and perceived ease of use. In theory, the combination of these two factors pulls users in and pushes crypto into the mainstream.

Developing blockchain tools that are both useful and easy to use is challenging, but it is within our reach. In order to drive the mass adoption of cryptocurrencies, we need solutions accommodating all users regardless of technical ability, simplifying the process of both storing and using crypto.

Blockchain Should be Designed for Everyone

To Achieve Mass Adoption We Must Fight for "Blockchain Inclusion"

As cryptocurrencies begin to filter slowly into the global economy, we need to ensure that their entry into the mainstream is as fluid as possible. As with all new technologies, there are multiple barriers to entry such as accessibility, cost and education.

Products such as wallets and payment options should be so simple that individuals can make cryptocurrency transactions without understanding the mechanics behind them. Our technologies should be made blockchain agnostic, meaning they can operate on top of any blockchain.

User Experience Should Be at the Heart of Our Solutions

We can also engineer crypto products that look and feel like traditional banking products. These include classic payment cards and banking mobile apps. They can easily be embedded within our current financial infrastructure, and signed to be used at ATMs and POS terminals.

Products do not have to rely on third parties; we can process payments, transfers and just about anything else to do with crypto. This will ensure faster transmission and lower transactions costs.

The barriers to both technological and financial inclusion will crumble if we make it simple to use cryptocurrency. We need to place users at the heart of our solution. We should be committing ourselves to blockchain inclusion, while still having a chance to build the products that will define our new digital economy.

Do you think bad user experiences are contributing to problems of adoption? How far away from more “blockchain inclusion” are we? 


Images courtesy of Shutterstock


OP-ed disclaimer: This is an Op-ed article. The opinions expressed in this article are the author’s own. Bitcoin.com does not endorse nor support views, opinions or conclusions drawn in this post. Bitcoin.com is not responsible for or liable for any content, accuracy or quality within the Op-ed article. Readers should do their own due diligence before taking any actions related to the content. Bitcoin.com is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any information in this Op-ed article.

The post Op-Ed: To Achieve Mass Adoption We Must Fight for ‘Blockchain Inclusion’ appeared first on Bitcoin News.

Stablecoins Demand More Trust than Fiat Currency

Stablecoins Demand More Trust than Fiat Currency

This article about the problem with stablecoins was written by Kevin Murcko, the CEO at cryptocurrency exchange, CoinMetro, and forex broker, FXPIG.

Stablecoins — digital coins which peg their value rigidly to the dollar, the euro, or a collage of national currencies — are all the rage right now. Tether, in particular, is on everyone’s lips. In fact, it’s one of the most heavily traded cryptos in the market right now.

Also read: Stablecoins Fetch a Premium as BTC Hits Year Low

Stablecoins Demand More Trust than Fiat Currency

The appeal of Tether and other stablecoins is somewhat understandable. All cryptos are nascent assets; speculation, rather than the usefulness of the technology or the underlying asset, is what’s mostly been driving price movement. That’s led to wild volatility.

Traders love volatility, but not unreasonably, some people see a problem. Volatility is broadly incompatible with the concept of a day-to-day currency and a store of value. “Stablecoins” have arrived to fix this by, ostensibly, digitizing a fixed value in terms of dollars or an equivalent.

The Use Cases for Stablecoins

Certainly, there are a handful of legitimate use cases for stablecoins.

Let’s say a liquidity provider owes me $0.5 million. Maybe I need that money immediately to be able to rebalance my book — the traditional banking system isn’t the best way to do that. Even if we’re with the same bank, it can take a while to clear that transaction.

Stablecoins are useful because I can instantly clear funds back and forth. They offer the convenience and speed of using crypto without the caveat of volatility.

As the International Monetary Fund’s Christine Lagarde pointed out in a speech this month, Central Bank Digital Currencies (CBDCs) are another intriguing opportunity. While the benefits aren’t fully understood, CBDCs have the potential to limit costs and risks to payment systems, mitigate fraud and money laundering, and potentially even boost financial inclusion throughout the developing world.

Substituting Fiat Currency

Stablecoins Demand More Trust than Fiat Currency

Beyond these examples, however, stablecoins really struggle to prove their worth. Front-end, business-issued stablecoins (practically all stablecoins being traded at the moment) fall flat.

Currently, these stablecoins are used as substitutes for fiat on crypto exchanges that don’t have access to central bank-issued money. It’s not that these tokens are preferential to fiat. Rather, they’re band-aid solutions for retail exchanges which, for various reasons, can’t open and maintain adequate fiat on-and-off-ramps — usually because they aren’t properly licensed to offer fiat, or because they don’t have access to the necessary banking.

Why, in most circumstances, aren’t stablecoins preferential to fiat? It ultimately comes down to trust.

As we all know, crypto was originally intended to be trustless. The Bitcoin whitepaper laid out a vision to escape “to transact directly with each other without the need for a trusted third party.”

What stablecoins represent, in many ways, is the antithesis of that idea. The crypto community now uses privately issued tokens or coins that are pegged to the very currencies they originally wanted to pull away from. That’s problematic for a number of reasons.

Stablecoins require you to have confidence, not only in the government, but in an undependable, easily corruptible private company. We have to place our faith outside of the chain and in these companies’ ability to self-regulate supply and demand.

The Collateralization Problem

That’s a tall order. Stablecoins can be split into three states of collateralization, or the extent to which the coin is backed one-to-one by fiat. Some coins are fully collateralized, others are partly collateralized, and others are entirely uncollateralized. Unfortunately, all provide insufficient mechanics to properly regulate price.

For noncollateralized tokens, value is essentially suppressed by “printing” digital money. That’s all well and good, but when the price drops, it’s not possible to un-issue what’s already in circulation.

Here’s the snag. If the smart contract can’t keep the price at $1, then the algorithm is forced to issue bonds, promising users an entitlement to coins in the future. The bonds are then redeemed, and the price returns to $1.

That’s the theory, at least. The issue is, these bonds can only really be serviced if the platform is in an overall state of growth. The headache arises when the price keeps on dropping, and increasing numbers of bonds have to be issued until this price returns to trading level or above par. Bonds can’t be issued indefinitely.

The Fundamental Flaw: Artificial Inflation

Stablecoins Demand More Trust than Fiat Currency

Partial collateralization presents a minor improvement over the complete lack of reserve assets, but it still has a fundamental flaw: If confidence in the platform dips, then the company has to artificially inflate the price of its token by drawing on a finite pool of fiat reserves, preventing the price from plummeting. This, of course, has a limit. A company can only buy back so much of its own currency.

Presumably then, “fully collateralized” models like Tether are therefore reliable? Not really.

Even if we take the company for its word (there’s some uncertainty as to whether their assets are fully collateralized), it still doesn’t make much sense to abandon the relatively safe greenback for an inconvenient crypto that doesn’t always have fiat parity, provides no consumer protections, and is vulnerable to hacking.

Stablecoins: An Awful Idea

Central banks may not be the ideal institutions to trust, but many have stood resolutely for decades with the primary goal of maintaining our trust in their money. If privately backed stablecoins are designed to replace our reliance on these central banks with a reliance on a combination of both central banks and their loosely regulated businesses, then this seems like an awful deal to say the least.

Let’s not confuse lack of volatility with stability. That’s a dangerous mistake to make. Yes, many stablecoins do have relatively “stable” prices, but “stability” — in another sense of the word — is also about reliability, and that’s one thing that can’t be said of stablecoins, which demand far more trust than the original fiat.

Do you agree that stablecoins are overhyped? Can stablecoins solve the problem of volatility? What is the future of the stablecoin? 


Images courtesy of Shutterstock


OP-ed disclaimer: This is an Op-ed article. The opinions expressed in this article are the author’s own. Bitcoin.com does not endorse nor support views, opinions or conclusions drawn in this post. Bitcoin.com is not responsible for or liable for any content, accuracy or quality within the Op-ed article. Readers should do their own due diligence before taking any actions related to the content. Bitcoin.com is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any information in this Op-ed article.

The post Stablecoins Demand More Trust than Fiat Currency appeared first on Bitcoin News.

Why the Energy Sector Meets the Conditions for Decentralization

The following piece on decentralizing the energy sector was written by Richard Lohwasser, who holds a PhD in energy economics and is the CEO of Lition. He was previously a strategy consultant for McKinsey and director of Vattenfall. Lohwasser was also Managing Director of German Operations at ExtraEnergie.

Decentralization. Digital autonomy. Circumventing corporate strangleholds on information. A new, democratized internet. The blockchain revolution has inspired a wave of ideological fervor around technological advancement that is unprecedented in the mild-mannered, minimalist world of the Silicon Valley tech giants. Crypto gurus, emboldened by new-found fortunes, decry centralized data systems, and herald an internet of no gods, no masters.

Also read: Markets Update: BCH Rallies, XRP Nears ETH Market Cap

The Democratization of an Industry

Why the Energy Sector Meets the Conditions for Decentralization

It makes sense. When Facebook is listening to your conversations and tailoring ad content accordingly, and Equifax is losing credit card and social security numbers by the millions, burning the old house to the ground seems like a plausible solution.

Blockchain startups left and right have latched onto this ethos of disruption, vowing to fundamentally redefine established industries from the bottom up. The purveying sentiment seems to be “Decentralize everything.” While breaking the grip of old guard institutions is a great rallying cry, there are a few important question to ask before trying to democratize an industry.

Asking the Right Questions About Decentralization

Why was the industry centralized in the first place?

Industries like banking originally centralized to bring stability, security, and ease of use to consumers. While cryptocurrencies offer their own benefits, such as anonymous, worldwide transfers, fluctuating value, hackability, and over-saturation could prove that monetary decentralization isn’t the perfect application for blockchain, especially in regards to widespread adoption.

Would decentralization improve the industry?

Decentralization is only valuable when there is a network of participants to decentralize to. If there is a single service provider or a passive user base, decentralization can make the system unnecessarily inefficient. Diverse networks with intermediaries that do not add value or security are best suited to decentralization.

Do people care enough to participate?

The average person doesn’t want to micromanage every aspect of their digital footprint. Decentralization inherently encourages user participation. If users don’t care about interacting, the system must either have some level of automation or might be best left centralized.

Why the Energy Sector Meets the Conditions for Decentralization

In the frenzy to decentralize via blockchain, many industries are introducing unnecessary systems than will only complicate service delivery. However, the modern energy market is primed for decentralization.

Historically, energy was provided by massive corporations, who were the only ones with the capital to build the infrastructure required to generate power. Dirty coal and natural gas plants were often the only energy available. In this system, decentralization would be unnecessary, if not completely illogical. However, times have changed.

A Decentralized Network for A Decentralizing Ecosystem

Energy production has diversified. Your neighbors may have installed solar panels on their homes. A local biofuel plant might be opening a few miles down the road. A wind farm may be churning away just off the coast. Energy is getting greener and renewables are the future.

Unfortunately, large utility companies, heavily invested in dirty energy, hold monopolies on power systems, which in turn holds the entire energy ecosystem back. Green producers are forced to sell through the utility companies as intermediaries. This barrier between producers and consumers drives up costs and stifles the growth of renewables.

Decentralization would allow for energy producers and consumers to circumvent intermediaries to buy and sell directly, mitigating the current problems. Peer to peer trading could increase producers’ profits by 30 percent and save consumers more than 20 percent on their energy bills. In this situation, decentralization is imperative for both the economy and the environment.

Higher profits would incentivize producers to participate in a decentralized network, but why would the average consumer care? The answer is twofold.

  • The more agency a consumer has to feel like they are making a difference in the world, the more likely they are to partake in a sustainable behavior, like shoppers consciously purchasing fresh, local, farm-to-table foods in exchange for peace of mind that the produce did not use harmful chemicals and supports local farmers. The same concept is applicable to energy. Directly displaying energy sources allows consumers to decide what option best fits their budget and world view.
  • If actively sourcing green energy entails more involvement than a consumer wants, AI interpreting data sets can handle automated buying strategies, sourcing cheap, renewable energy without user input, helping the planet and their wallet with little to no effort on their part.

Power to the People?

Why the Energy Sector Meets the Conditions for Decentralization

In the rush to decentralize everything via blockchain, taking a step back to ask why an industry needs to be decentralized is a crucial process that many companies and investors are currently ignoring. Understanding why a network is centralized is paramount in answering the question: Should it be decentralized?

The energy sector is one that passes the decentralization test with flying colors. Current centralization is the product of outdated monopolies, holding back the growth of renewables.

Directly connecting producers and consumers is the key to fostering the growth of renewables and saving money across the board. User participation is encouraged, but not necessary for the network to thrive, as the producers are the primary active users driving the system. Decentralizing the energy sector is a logical and tangible way to protect the planet and introduce the energy ecosystem of tomorrow.

What do you think about decentralizing the energy sector? Will it help break the monopoly some companies hold over the sector?  


Images courtesy of Shutterstock


OP-ed disclaimer: This is an Op-ed article. The opinions expressed in this article are the author’s own. Bitcoin.com does not endorse nor support views, opinions or conclusions drawn in this post. Bitcoin.com is not responsible for or liable for any content, accuracy or quality within the Op-ed article. Readers should do their own due diligence before taking any actions related to the content. Bitcoin.com is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any information in this Op-ed article.

The post Why the Energy Sector Meets the Conditions for Decentralization appeared first on Bitcoin News.

Holacracy: Governance in an Age of Innovation and Subversion

Holacracy: Governance in an Age of Innovation and Subversion

The following opinion piece on Holacracy was written by Max Borders, director of Social Evolution and author of The Social Singularity

Imagine turning on your mobile device one morning to find only two apps: Red and Blue. It’s bad enough that these are the only two choices. Only one works at a time–and not very well.

Also read: Markets Update: Traders Play a Lower Range After Cryptocurrency Prices Dip

And yet this is more or less the social operating system upon which most of the developedHolacracy: Governance in an Age of Innovation and Subversion world runs. The Madison-style Constitution was a great innovation, but it’s still built atop the 2000-year-old DOS (Democratic Operating System).

“It has been said that democracy is the worst form of government,” Winston Churchill remarked, “except all those other forms that have been tried from time to time.”

Really? Is this the best we’ve got? Such a fatalistic view gives us an excuse to accept the status quo, but it is a failure of imagination. It’s time to rethink governance.

Changing Our Relationship to Power

The strongest candidate for a new global-scale social operating system is Holacracy.

Never heard of it? Holacracy is a organization management system Brian Robertson developed to help businesses run without bosses. HolacracyOne’s mission is to “change our relationship to power” and the system does just that, which is exactly why some are skeptical. After all, command-and-control systems have been working for blue chip companies and standing armies for centuries.

But now, more than 1000 companies worldwide have adopted Holacracy, jettisoning the traditional firm structure.

If you’re into cryptocurrencies, you already know that command-and-control hierarchiesHolacracy: Governance in an Age of Innovation and Subversion can be destructive and inhumane. Satoshi Nakomoto, for example, wanted both to help us escape the inflationary Skinner box of central banking and build bitcoin in a decentralized way. The idea was to work with a growing team of coders and miners to build out the ecosystem, but no one would control the network. Satoshi changed our relationship to power — for both developers and users.

Holacracy provides a governance framework that is decidedly holonic — roughly, systems within systems. In this way, a holacratic organization approximates a living organism as opposed to a machine to be “run.” Practitioners aren’t arranged by managers as cogs within a traditional org chart, but rather define their own functional roles within wider spheres of activity, or “circles”.

Just as cells make up organs within organisms, people have roles within teams within organizations. And though certain cells and roles might hustle themselves into an “executive function,” both the organism’s and the holacratic organization’s brains are self-organizing.

How Holacracy Works

Holacracy makes an organization a complex adaptive system. Unlike command-and-control hierarchies, complex adaptive organizations respond with relative autonomy to stimuli that are, for lack of a better way of putting things, not quite right. Practitioners call these “tensions.” Every part of the organization wants to get things flowing, following constructal theorist Adrian Bejan. To resolve tensions is to get things flowing–that is, towards realizing the mission.

At the risk of oversimplification, let’s break it down:

  • Mission. Why the organization exists at all and the end all roles serve.
  • Holacracy Constitution. Sets out the relatively fixed protocols and fundamental rules that make up Holacracy’s (open source!) social operating system.
  • Tactical Meetings. A group process for addressing one-off, operational issues in a formalized way, relevant to some functional sphere of activity.
  • Governance Meetings. A group process for creating roles, making policies, or assigning ownership of responsibilities.
  • Data management. The inputs and output of meetings gets recorded so that anyone can see the rules, roles, policies and system interconnections at any time.

The devil is of course in the proverbial details. And learning the system is rather like learning a team sport: You can’t learn the game from the rulebook. You have to get out there and practice. But in doing so, practitioners can become Holacracy pros–increasing organization efficiency while scaling.

But how far up can Holacracy scale?

Teams within Teams (within Teams)

Complexity scientist Yaneer Bar-On warns of the coming breakdown of the current order:

Why should governments fail? Because leaders, whether self-appointed dictators, or elected officials, are unable to identify what policies will be good for a complex society. The unintended consequences are beyond their comprehension. Regardless of values or objectives, the outcomes are far from what they intend.

But Bar-on suggests a solution.Holacracy: Governance in an Age of Innovation and Subversion

It begins with widespread individual action that transforms society — a metamorphosis of social organization in which leadership no longer serves the role it has over millennia. A different type of existence will emerge, affecting all of us as individuals and enabling us to live in a complex world.

To be successful in high complexity challenges requires teamwork. Each team member performs one part of what needs to be done, contributing to the complexity and scale of what the team does while limiting the complexity each individual faces.

Holacracy — or something close to it — seems to be a system that that adequately deals with complexity through the application of superior team dynamics.

Scaling to Society

If Brian Robertson is to be believed, it’s possible for Holacracy to scale to the level of society. I think he’s onto something. Robertson draws influence not only from his computer science background, but from integral theorist Ken Wilber. In his philosophical work, Wilber expands on Arthur Koestler’s holarchy, that is, the idea that systems can give rise to systems (that can give rise to systems) at different levels of description.

And with that we come full holon. Robertson puts it best:

Anarchy comes from the greek “an”, meaning without, plus “arkhos”, meaning rulers. Anarchy doesn’t mean without rules, but without rulers. If you have the right rules, the absence of top-down rulers doesn’t remove order —i t simply enables order to emerge dynamically from peer-to-peer interactions distributed throughout a system, one tension at a time. So by this definition, you could describe Holacracy as a rule system for humans working together in anarchy—with rules, but without rulers.

Hmm. I thought anarchy was all punk rock and molotov cocktails.

Getting There from Here

By this point, you might want to know how to get there from here. With humility, I offer what can only be described as a set of interconnected cliches that one might associate with crypto-enthusiasts:

  • Start using it. Adoption shows its benefits better than any article.
  • Don’t half-ass it. Adulterated versions create problems that tarnish Holacracy’s reputation and cause people to re-embrace hierarchy.
  • Hold onto it. The longer you use it, the more wider ecosystems can develop.
  • Train others. The more we can reduce the time and cost of adoption, the better.
  • Underthrow. When hierarchy hits the fan, people will seek a more antifragile way to organize what’s left of society. Holacracy will already be in full flower.

I realize that last point is a rather dark note on which to close, but keep in mind that as society becomes more complex, hierarchical governments running on DOS will have a hard time keeping up with the information processing demands. Meanwhile, practitioners of Holacracy will be running their distributed organizations and changing their relationship to power. They already hold the source code for a new era of rules without rulers.

Do you think holacratic forms of governance will replace democracy? 


Image courtesy of Shutterstock and Kindling XYZ


OP-ed disclaimer: This is an Op-ed article. The opinions expressed in this article are the author’s own. Bitcoin.com does not endorse nor support views, opinions or conclusions drawn in this post. Bitcoin.com is not responsible for or liable for any content, accuracy or quality within the Op-ed article. Readers should do their own due diligence before taking any actions related to the content. Bitcoin.com is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any information in this Op-ed article.

The post Holacracy: Governance in an Age of Innovation and Subversion appeared first on Bitcoin News.

Debunking Dr. Doom

Debunking Dr. Doom: Building a New Global Economy on a “Glorified Spreadsheet"

This rebuttal to Dr. Doom, AKA Nouriel Roubini, was written by Thomas Schouten, the Head of Marketing at Lisk. Schouten holds a Bachelor of Science in Business Administration and a Master of Science in Strategic Entrepreneurship from Erasmus University Rotterdam. 

Nouriel Roubini, a long time skeptic of cryptocurrencies, unleashed another wave of negative rhetoric recently, aiming to undermine the potential of the underlying blockchain technology. In a stunning piece, he referred to blockchain as “the most over-hyped — and least useful — technology in human history.”

Also Read: Meet ‘Spedn’ — A Smart Contract Programming Language for Bitcoin Cash

Roubini’s Hyperbolic Statements and Blockchain’s Ascendancy

Unfortunately, the excessive and borderline hyperbolic statements go far beyond anything imaginable. A respected Professor and Economist, Roubini has let his inflammatory, irrational remarks mask some fair observations about the ever-evolving crypto space.

The reality is, we are already witnessing blockchain technology begin to deliver new levels of innovation and efficiency to a host of different industries. But with any groundbreaking technology, development comes in intervals, not sustained surges. It’s easy to point a finger at the current crypto market and paint a picture of a sector in decline. But this is simply ill-informed. We are experiencing a maturing market, one in which quality projects are in the ascendancy, and scam projects being exposed.

A Myth Propagated by the “Pseudo-Billionaires”

Debunking Dr. Doom: Building a New Global Economy on a “Glorified Spreadsheet”

The concept of decentralization, rooted at the core of blockchain technology is not a “myth propagated by the pseudo-billionaires”, as Roubini puts it. This is a movement that has captured the imagination of students across the world, passionate developers, critical thinkers, and a new generation of innovators who believe deeply in the principles of decentralization, transparency, and efficiency.

I find it insulting to have my work, and the tireless efforts of my colleagues characterized by greed. Myself, and thousands of others operating in the wider blockchain and crypto ecosystem, have poured our hearts and souls into bringing our visions for a future based on decentralization to fruition. A future where individuals are empowered to bring real change to the world.

Roubini Refuses to Debate Buterin

Sadly, Mr Roubini has refused to engage in a debate with Vitalik Buterin, Co-Founder of Ethereum. As a seasoned economist who has held the position of senior adviser to the White House council of economic advisers and the U.S. Treasury, his credentials speak for themselves. But for someone who is so assertive in his beliefs about the crypto and blockchain space, it’s a shame to see him shy away from an opportunity for healthy debate, which is crucial to the growth of any sector.

In March of this year, Roubini cast doubt on the prospect of major institutions tapping into the power of blockchain, and underlined that belief by recently suggesting the technology had “become the byword for a libertarian ideology that treats all governments, central banks, traditional financial institutions, and real-world currencies as evil concentrations of power that must be destroyed.”

To the contrary. Many of the above groups, which, according to Roubini, are the enemy of the blockchain movement, are in fact pursuing blockchain innovation; and in turn, accelerating the ascent of the technology into mainstream society.

Blockchain Development is Growing, Despite Roubini’s Arguments

For example, there has been a prevailing sentiment within the European Commission that blockchain technology can be a mainstream enabler of innovation. In April, European Commission Vice President, Andrus Ansip opened the door for a mainstream blockchain revolution in Europe, identifying the technology as one of “the areas where Europe is best positioned to play a leading role.”

Debunking Dr. Doom: Building a New Global Economy on a “Glorified Spreadsheet”

That same week, 22 European nations came together to form the European Blockchain Partnership, geared towards promoting blockchain applications across the Digital Single Market and establishing a European Blockchain Services Infrastructure (EBSI) to support the delivery of cross-border digital public services.

Legacy Finance Professionals Pivot, but have they all been Duped?

The robust health of the space is further illustrated by the growing trend of high profile professionals redirecting their career trajectories towards the booming blockchain space. This trend has been highlighted again recently, following the news that Former White House Economic Advisor Gary Cohn has joined blockchain start-up Spring Labs. This follows similar career transitions, like that of former Head of Commodities at JP Morgan and now CEO of blockchain company Digital Asset Holdings, Blythe Masters.

Have these esteemed professionals been duped by the “least useful technology in human history”, as Mr Roubini describes, or do they represent an expanding cohort of professionals inspired to bring the benefits of blockchain to the masses? I’ll let you decide.

A recent quarterly index from Upwork identified blockchain development as the most highly coveted skill in the freelance job market, growing more than 6000% since Q1 last year. For too long there has been a chasm between supply and demand for proficient blockchain developers; but thankfully, the groundswell of momentum behind blockchain is now extending to educational institutions. Now, almost half of the top 50 universities in the world provide courses on the subject.

Have Educational Institutions also been Tricked into Studying Blockchain Tech, Roubini?

Debunking Dr. Doom: Building a New Global Economy on a “Glorified Spreadsheet”

The blockchain education landscape in the United States has developed significantly over the past 12 months, with Stanford University offering ten different courses on blockchain technology and cryptocurrencies, while New York University now provides students with the chance to major in blockchain technology. In the UK, blockchain education initiatives are also springing up at a healthy rate. I suppose these elite institutions have also been tricked into exploring a useless technology, Roubini?

One needs only examine the wider international blockchain space to gain a measured understanding of its current state, defined by a rapidly expanding jobs market, governmental exploration of the technology, education initiatives, and EU-wide partnerships. This doesn’t sound like a technology that is “collapsing and imploding in every possible dimension.” 

“Glorified Spreadsheet” or Revolutionary Tech?

Roubini’s further description of blockchain as “a glorified spreadsheet” is an embarrassing encapsulation of a revolutionary technology. The space is maturing at a healthy pace, as hardworking and passionate teams around the world are laying the foundations for a sustainable blockchain and crypto ecosystem for the future.

What do you think about Roubini’s arguments against technology? Do you have any other rebuttals to Dr. Doom? Let us know in the comments section below.


Images courtesy of Revista ProActivo and Shutterstock.


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