IBM could launch a finance-oriented blockchain solution as early as this fall.

According to The Wall Street Journal, IBM's Global Financing unit is looking to kick off a project that would focus on resolving transaction disputes. The system reportedly won’t replace the Global Financing unit’s existing systems, at least not in the near term. Rather, it will operate beside what is currently used.

According to IBM, as many as 25,000 disputes arise in this division of the company each year, holding up as much as $100m in capital. The blockchain-based system is expected to reduce the time in which it takes to clear a dispute and release the contested funds.

Though no release date is known at this time, IBM could launch the blockchain solution as early as September, the report said.

In addition to its internal blockchain work, IBM is also a contributor to the Linux Foundation-led Hyperledger Project.

financing resolutionIBM

William Mougayar is the author of "The Business Blockchain", and a board advisor to the Ethereum Foundation, the non-profit that oversees the development of one of two blockchains seeking to popularize the ethereum software.

In this opinion piece, Mougayar offers his thoughts on the recent ethereum hard fork, opining on how he believes it showcases issues in current public blockchain governance.

We always hear the word "community" as a reference to the body of players who are supposed to be the stakeholders that care the most about such or such blockchain.

This term has been a cornerstone of recent events, like bitcoin's 'block size' debate and the ethereum hard fork, coloring how these events are communicated to the wider public.

But what does "community" mean in this context?

Defining community

According to blockchain theory, the community is supposed to determine the future of a given public blockchain via decentralized governance and the magic of consensus.

Consensus decision-making is at the heart of public blockchains, because a plain majority can sway it one way or the other. Just like an election, more or less.

The baseline of a blockchain rests on its economic soundness, and the reality is that some players hold the strings to this economic soundness more than others. (Economic soundness also directly relates to blockchain security, but let’s not digress on that important tangent).

With such deciding power on the future of public blockchains, the community is an important body, because it represents the current governance.

So, I went on a research investigation to figure out the composition of a typical blockchain community. What I found is that this deciding community is a subset of a larger ecosystem.

The community represents the base players that have had an earlier economic role in the ecosystem. They are mostly the insiders, and they have an advantage in being more "in-the-know" than others. Their voices are louder, and their collective actions (or inactions) can effectively determine a blockchain's trajectory.

Who's who?

There is something contrarian about cryptocurrency communities.

In the traditional sense, most companies will firstly gain users or customers, either as end-users or developers. Then the body and variety of users becomes the community.

In the cryptocurrency space, that sequence seems to be inverted.

We start with the community of core supporters before we get to a large set of end-users. That’s okay, and perhaps a characteristic of fundamental technologies that need to garner a strong base before they flourish.

Generically, the base players of a cryptocurrency community are largely developers, exchanges and miners..

The larger ecosystem involves several other participants. It can be portrayed to include the base players, in addition to groups like venture capitalists and mainstream users.

Here's a breakdown of each group:

Let us take the cases of the recent ethereum hard fork decision, and the bitcoin block size debate epitomized by the Scaling Bitcoin conference series.

In both instances, the community was mostly formed of the respective base players. But these base players are a relatively small group.

In the bitcoin case, the number of attendees to the widely publicized Scaling Bitcoin process was probably under 100. And in the case of ethereum, when the Carbonvote was tallied, only a total of 1,325 addresses voted, which is a relatively small number compared to the overall number of ETH holders (considering there is an available supply of 82 million ETH).

Ecosystem approach

I hope we eventually use the word ecosystem instead of community, because it is more representative of a marketplace in the making.
And I wish that a part of this larger ecosystem would also have a voice into the future of these public blockchains.

Currently, the larger ecosystem is mostly a powerless silent majority that is watching events unfold, while remaining hopeful that the vocal and more powerful minority is going to lead the market in the right direction.

Eventually, any large scale public blockchain will need to reach a more balanced state where community leadership and ecosystem inclusion work together to strengthen its longevity and sustainability potential.

The base players are the community today, and they are steering the boat right now, but will they in the future?

Cul-de-sac image via Shutterstock

Disclaimer: The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, CoinDesk.

Block SizeEthereumEthereum Classic

Bitcoin has been called 'digital gold', but does this mean the two markets behave similarly?

This relationship has been top of mind for industry observers for some time, as media coverage has often championed the idea bitcoin is a new 'safe haven' asset.

But while some market observers have claimed there is a correlation between bitcoin and gold, members of the digital currency trading community disagree. Further, some have collected data they believe shows this relationship is speculative at best.

Though bitcoin and gold have frequently displayed a notable correlation during times of macroeconomic crisis, this relationship has often broken down once market conditions return to normalcy.

Tim Enneking, chairman of cryptocurrency investment manager EAM, for example, told CoinDesk:

"There is actually very little correlation when you factor out geopolitical events that drove prices for everything up or down."

Gaining meaningful insight into the relationship between bitcoin and gold requires looking into market correlation, he asserted.

"When overall market correlation is high, so is the correlation for this pair, at least recently," he stated. "When overall correlation is low, so is the correlation between these two."

Petar Zivkovkski, director of operations for bitcoin trading platform Whaleclub, went a step further, stating that his firm has yet to detect any "significant statistical correlation" between bitcoin and gold.

He added:

"Any direct or inverse correlation over a set period of time is, in our opinion, purely coincidental."

Assertions like these could pour cold water over the hopes of many market participants who want the two assets to correlate reliably.

Analysis of correlation

While the price movements of bitcoin and gold are open to interpretation, having greater insight into the relevant market data can help readers develop more well-informed points of view.

An analysis of historical market data conducted by ARK Invest's Chris Burniske failed to illustrate a strong relationship between the two.

Burniske's analysis revealed that when examined on a weekly basis, the one-year rolling correlation of bitcoin and gold's returns was positive for nearly the entire period between 30th December, 2011, and 20th June, 2014.

However, this correlation averaged 0.14 during the period, pointing to a rather weak relationship.

While a correlation coefficient of 1 would indicate their returns followed each other perfectly, a correlation of zero would indicate there was no relationship at all. Since the figure of 0.14 is rather close to zero, it points to a very flimsy relationship between the returns of gold and bitcoin.

On 27th June, 2014, the rolling one-year correlation between bitcoin and gold became negative, staying that way for almost the entire period between then and 24th June, 2016.

The correlation averaged -0.20 during this time, once again failing to illustrate a strong relationship between the two.

When analyzed on a monthly basis – taking data from the first Friday of every month, the correlation was positive for nearly all of the period between 6th January, 2012, and 6th June, 2014.

During this time, the correlation between gold and bitcoin was once again weak, averaging 0.13.

On 4th July, 2014, the relationship between the two became negative, and remained that way for most of the remaining time until 3rd June, 2016.

The relationship between gold and bitcoin became slightly stronger during the time, averaging -0.21.

At this level, the correlation between the two still failed to be significant.

Market size, dynamics

When explaining the low correlation between bitcoin and gold, market experts pointed to both the differing market size and market dynamics of the two assets.

Zivkovski described the bitcoin market as "tiny" in comparison to the gold market, emphasizing that "the demand needed to drive gold prices" is much greater than needed to boost bitcoin.

Max Boonen, founder of market maker B2C2, provided a similar statement, telling CoinDesk that the market is "too small" to behave like the older, more mature gold market.

Market expert Arthur Hayes, co-founder and CEO of bitcoin leverage trading platform BitMEX, also noted the prevalence of "retail derivatives products like ETFs" that exist for the gold market as affecting its price movements. Currently, there are two bitcoin-based ETFs that awaiting the approval of regulators.

Blockchain technology firm SolidX announced 12th July that it had filed a registration statement, and government authorities are also considering an ETF proposed by investors Cameron and Tyler Winklevoss.

Rising bitcoin adoption

While the market for gold is far larger – and more mature – than that of bitcoin, the digital currency is enjoying rising adoption.

Bitcoin’s transaction aggregate transaction volume has been growing significantly as of late, and people are becoming increasingly open to trying out digital currencies, said Joe Lee, founder of derivatives trading platform Magnr.

As a rising number of market participants embrace bitcoin, the digital currency's price will push higher at times when gold does not, algorithmic trader Jacob Eliosoff told CoinDesk.

For example, if a major institution adopts bitcoin, this will affect the digital currency's price, he noted. However, there is little reason to believe this development will impact gold prices.

Past that, Eliosoff noted that bitcoin is likely to respond to positive technical developments, such as the resolution of longstanding issues regarding how the network handles the size of transaction blocks.

"Over time we should see fewer dramatic bitcoin headlines, with its price moving more and more in line with other fixed-supply commodities," he predicted, concluding:

"I'd bet that's many years and a huge price rise away."

Gold weight image via Shutterstock

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The maker of ad-blocking browser Brave has raised $4.5m to expand its effort to let users voluntarily send bitcoin micropayments to their favorite websites in exchange for an ad-free experience.

When Brave Software first unveiled a version of the browser earlier this year, members of the media signed what has been called a cease-and-desist letter addressed to Brave. Signed by some of the biggest publishers in the world, the letter described what they perceived as the browser’s "blatantly illegal" blocking of their ad revenue.

Since then, the company’s founder has been engaging with those media outlets one-on-one in an effort to explain that Brave isn’t meant just to prevent Internet users from having their data mined, but to give media organizations a way to recover revenue from those who are already blocking ads.

In conversation with CoinDesk, Brave Software founder and CEO Brendan Eich said he intends to use the money to double the company's employees from 10 to 20 people and continue to help bridge the gap between content creators and users.

Eich said:­­­

"We want win-win for users and publishers. We put users first, but we want publishers to earn a better share than what they receive with traditional ad blocking."

Participating in the round are Founders Fund's FF Angel, Propel Venture Partners, Pantera Capital, Foundation Capital, and Digital Currency Group.

With a total of $7m now raised, the San Francisco-based firm plans to invest the money in adding new features to the platform and hiring additional staff with a special focus on quality assurance as part of its growth strategy.

The value proposition

Dan Morehead, CEO of Pantera Capital, which invested $1m in this most recent round, told CoinDesk it is exactly this ability to navigate the space between content creators and consumers that first "resonated" with his firm.

Morehead points to a history of seemingly dominant browsers including Netscape and Internet Explorer being disrupted by innovative new services as evidence of the place he sees Brave filling in the market today.

In Brave’s case, that innovation is a business model that empowers users by protecting their identity and gives media companies a way to generate the revenue.

"Right now you have the two extremes. The annoying ad and subscription models and the annoying ad blocking," said Morehead, adding:

"Brave is this middle ground between the crazy ad system we currently have and where all ads are blocked and no content is produced."

Bitcoin, bitcoin, bitcoin

Brave is currently partnering with wallet providers BitGo and Coinbase to provide bitcoin wallets and purchasing tools and Eich says he hopes to partner in the future with wallet provider Blockchain.info.

But he added that while support for diverse wallets is a high priority, Brave has no plans to add support for ethereum or its new cryptocurrency cousin, Ethereum Classic.

"We’re just sticking with bitcoin because we need something frictionless under the hood," he said.

He concluded:

"We’re still excited about using bitcoin."

Going forward, Eich says one of the company’s top priorities will be to design identity-protection services that do a better job of preventing identifiable information from "leaking through" where marketers can access it.

Brave is currently available for download for iOS and Android mobile devices and several desktop platforms. The version currently available is a developer version, with a 1.0 release scheduled for September 2016.

Disclaimer: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Brave. Advertising image via Shutterstock Brave SoftwareFundingInvestors

Ethereum classic was never supposed to exist.

The hard fork of the ethereum blockchain earlier this month was meant to move funds associated with the hacking of The DAO into an account controlled by investors and leave the old record of transactions to be forgotten by history.

Most of ethereum's developers made the switch, as did exchanges, startups and other members of the budding ecosystem. For a few days, the project returned to normalcy.

But not everyone wanted that record to be forgotten.

A small group of miners continued to use the original blockchain as a protest for what they depicted as a bailout of the defunct project.

This movement picked up steam when exchanges began listing the cryptocurrency, known as ethereum classic (ETC). Now others, with different objectives have joined the project, and with a market cap of roughly $150m, ethereum classic has the sixth highest value of any cryptocurrency at press time.

But what gives ethereum classic value? And could it become a viable alternative to ethereum long term?

Based on a series of interviews with participants in the space, and posts across multiple social media outlets, the value propositions for ethereum classic break down into three categories.

The moral value

Ethereum classic exists because a notable minority of the ethereum community were so concerned about the implications of a hard fork that they invested mining power on a nearly-abandoned blockchain.

Though the functionality of the two networks is at the moment exactly the same, the symbolic power of a ledger that hasn’t been modified proved enough for one developer to take lead on keeping the chain alive.

In interviews with CoinDesk, project organizer Arvicco has argued that, by forking the blockchain, the ethereum project that continues as etherem abandoned the values that made it appealing.

He described the role that values played in his decision to get involved, and why a community has formed around it:

"I think it is very fortunate for ethereum ecosystem that there is now a choice for these people. Instead of giving up on the ethereum altogether, they self-selected into a separate ethereum community with a distinct set of values."

Given the size of its new market, some investors seem to agree.

The strategic value

But for every believer in ethereum classic's values, there were others who saw an opportunity to profit from the scism.

When digital currency exchange Poloniex listed ETC last week, the price in value accelerated to more than 300% in one 24-hour period. With that increased value and attention, another value proposition arose according to Ark Invest’s blockchain project lead Chris Burniske.

In conversation with CoinDesk, Burniske explained that one reason the ETC/BTC price pair has been the most liquid over the past several days is the influence "big traders" believe they can exert over ethereum classic.

While one form of this influence is certainly the ability to "move the ETC market", he says another possible explanation for the liquidity between BTC and ETC is that some bitcoin investors are "trying to sabotage ethereum in supporting the ETC blockchain".

Burniske said:

"It brings up contention between ethereum and bitcoin."

Undermining ethereum by investing in the upstart cryptocurrency ETC is also a way to to emphasize bitcoin's value proposition.

The lost opportunity value

In July 2014, ethereum inventor Vitalik Buterin launched a crowdsale for ethereum, selling 2,000 ETH for 1 BTC. At today’s rate, 1 BTC will buy approximately 50 ETH.

For those looking to turn back the clock on this potential investment opportunity, ethereum classic has proven an enticing way to do so.

Over the 24 hours preceding publication, ethereum classic had the second highest trading volume of any cryptocurrency with approximately $22m transacted in the top 10 pricing pairs.

What value?

Of course, with an increased susceptibility to a 51% attack and only a small number of developers actually building anything on ethereum classic, not everyone agrees that classic ethers could be valuable at all.

Bitcoin core developer Peter Todd told CoinDesk he had no plans to invest in ethereum classic, even to undermine ethereum or uncover new gains.

In a tweet earlier this week Todd wrote:

"Buying Ethereum Classic at ~$0 can be added to my long list of missed trading opportunities. lol"

Winning medals via Shutterstock

EthereumPrices

A group of researchers are encouraging universities to set up bitcoin nodes as part of an effort to allow students and professors to experiment and test the network.

The private testbed network, called BSafe, aims to help the technology proliferate, while possibly preventing instances such as the collapse of Mt Gox or The DAO from happening in the future.

"Most developers in this world think that [bitcoin's] fundamental cryptographic algorithm is ideal and can be used as a black box," Shin'ichiro Matsuo, co-founder of BSafe.network, said.

Matuso argues that bitcoin, and for that matter all crypto-financial projects, need a more diverse group of researchers exploring and analyzing the technology.

Matsuo told CoinDesk:

"We need to do more accurate evaluations on blockchain technology."

The network will also provide a communication channel between academia and Bitcoin Core developers on the many bitcoin testnets, the alternative blockchains used for testing code before actual live deployment on the bitcoin blockchain.

Debuted in February, the network currently has five nodes deployed: three in Japan, one in the UK and another recently set up by MIT. Matsuo’s goal is to have 30 university nodes set up before the end of the year, and farther into the future, three university nodes per country.

While bitcoin is the first target, Matsuo has ethereum and Hyperledger in his sights for expanding the network's work.

More minds sought

For Matsuo, the main aim is to bring anthropologists, sociologists, scientists and legal experts into the bitcoin community, which in the minds of many has turned into a pro-bitcoin echo chamber where critical assessments are often times met with scorn.

But for bitcoin to become a legitimate technology solution to all different types of consumers, neutral, unbiased research needs to be carried out.

"Right now the community is a meritocracy and the majority of it is based on whether you can code," said Cory Fields, a Bitcoin Core developer who’s helping BSafe set up a node at MIT.

This is a typical governance structure within the open-source community and can be a good thing in some ways but detrimental in others.

"Just because I can code doesn’t mean I know anything about economics and the outcomes of economic policies," Fields said. "There’s room for some academics with some weight behind them … to come along and say I can’t code but this policy will be disastrous in the future or worth investigating the outcomes."

Bringing in academics could be a very positive thing. Fields likens it to the development of the Internet, which grew out of a project originally aimed at linking universities together.

According to Fields, a consistent set of nodes working in unison would be able to measure things that have been hard to study before. He gave block propagation times – how long it takes to broadcast block authentication to the rest of the nodes – as an example.

Farming talent

Plus, organizers say, universities are a great way to develop talent in a niche field.

"In the space of what is now called blockchain, the expertise is actually quite thin," says Pindar Wong, co-founder of BSafe and well-known internet pioneer and bitcoin enthusiast.

He continued:

"The people who understand the elegant mathematics are unique individuals, probably less than 100 individuals currently take interest in bitcoin at the cryptographic level."

And this, making the space more attractive for people who may have different interpretations of bitcoin's pros and cons, is very near and dear to Wong’s heart. Bitcoin as a protocol for innovation lures in entrepreneurs who aren’t always the most safe individuals, he said.

But safety and soundness in the protocol is very important when dealing with consumer money, and bringing new people into the community also comes with hurdles.

"The thing that frustrates developers is that there are stages of understanding bitcoin and blockchain," said Fields.

When first learning about bitcoin, outside researchers come up with ideas to rewrite the consensus code to eliminate certain struggles. But these researchers generally don’t realize that those rewrites have been pitched many years ago, worked through and finally shot down.

'Bigger safety net'

Another advantage of setting up testbed networks could be finding vulnerabilities in the code before it leads to problems.

This process of testing code to guarantee that it does what it's supposed to do and nothing else is called code proving. According to Fields, it's a particularly important step in deploying code for many industries.

As it relates to the debates after The DAO attack, there was a camp that thought because users bought into the idea, they should be responsible for reviewing the code. But, not everyone that participated in The DAO had the technical capability to review the code.

"One of the ways around that is to have the code proven which gives a much bigger safety net for end users," Fields said.

But so far, tools for testing and proving these new blockchain protocols haven’t been created yet.

"The DAO and the ethereum hard fork has helped to emphasize the importance of security and correctness of the applications themselves and the protocols on which they depend, moreover the role that academia can play in contributing the productive discussions," Wong said.

Testbeds could bring this to the community.

BSafe is not the only testbed project for bitcoin that’s being set up currently, showing a trend towards diversifying the community.

"Like the internet in the 1980s, blockchain tech is not mature; there are many kinds of items there are still debates over in blockchain," Matsuo said, concluding:

"And we need many experiments to find a kind of good balance; these sandboxes could help find that balance."

Image via Shutterstock

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