Litigation Support Tip of the Night

January 25, 2018

There is a theoretical limit to the number of Bitcoins that can be mined - which is tied to the data structural limits of a blockchain.    Only about six new blocks (a reference to a new transaction, a preceding transaction, and the answer to a complex mathematical problem) of bitcoins can be generated each hour.    The Bitcoin system is designed to reduce the number of Bitcoins that can be generated by 50% every four years.   About 94% of Bitcoins will have been mined by 2024,  however assuming that processing / mining power remains constant the maximum of 21,000,000 may not be reached until more than a century after that point. 

January 24, 2018

Even with the recent decline the value of Bitcoins, blockchains are still a widely discussed and yet poorly understood in the business and legal worlds.   An excellent O'Reilly Blockchain Guide by Melanie Swan is available here.    Here's a summary of the key points made in the guide, Blockchain: Blueprint for a New Economy.

A. General

     1. Blockchain 1.0 - digital currency

     2. Blockchain 2.0 - smart contracts.

     3. Worldwide, public record for the registration and transfer of all assets  - finances, property, votes, software. 

B. Bitcoin 1.0 Currency

     1. Three Layer Technology Strack

          a. Cryptocurrency: Bitcoin; Logecoin; LItecoin

          b. Bitcoin protocol and client: software programs that conduct transactions. 

          c. Bitcoin blockchain: underlying decentralized ledger. 

     2.  Hundreds of cryptocurrencies exist, each may have its own blockchain or run on the Bitcoin blockchain. 

   

C. Blockchain 2.0 Contracts

     1. Bitcoin as conceived by Satoshi Nakamoto was designed to be more than a digital currency. 

     2. Decentralization of markets in general

     3. Blockchain 2.0 includes:

          a. Bitcoin 2.0

          b. Bitcoin 2.0 protocols

          c. smart contracts

          d. smart property

          e. dapps (decentralized applications)

          f. DAOs (decentralized autonomous organizations)

          g. DACs (decentralized autonomous corporations).

     4. Can be used to transfer stocks, bond, mutual funds, annuities, land titles etc..

D. Blockchain 3.0 Justice Applications Beyond Currency, Economics, and Markets

     1. Blockchain can also be used to organize physical assets and human activities. 

     2. Namecoin is used to verify Domain Name System (DNS) registration - not controlled by any government or corporation. 

     3. Digital Identity Verification - OneName and BitID - confirm a person's identity to a web site. 

     4. Digital art - registry of intellectual property. 

     

E. Blockchain 3.0: Efficiency and Coordination Applications Beyond Currency,Economics, and Markets

     1. Peer to peer distributed computing projects providing unused computing cycles for web based computing projects. 

    2. Bitcoin mining algorithm must make hashes verifiable in one direction but not the reverse.  Use of blockchain for science could address the wastefulness of bitcoin mining which consumes a lot of electricity. 

F. Advanced Concepts

    1. Hayek's concept of a competitive private market for money.

    2. MIT Bitcoin drop - free distribution - in Dominica to encourage adoption. 

    3. Demurrage Currency - carrying cost - losing value over time.  

G. Limitations

     1. Ethereum - alternative to the Bitcoin blockchain. 

     2. Ripple -- does not use blockchain. 

     3. Throughput - bitcoin can only process one transaction per second. 

     4. Latency - Each transaction block takes 10 minutes. 

     5. Bloat The blockchain is 25 GB and growing. 

     6. Security - 51 per cent attack - one entity could take control and double spend previously transacted coins into its own account. 

December 25, 2017

As previously discussed in the Tip of the Night for May 27, 2017, blockchains are a series of hash values stored on distributed databases and used to prevent the use of a digital token like a bitcoin more than once.    In addition to the hash values there are also time stamps and transaction data that are part of the blockchain.  Blockchains are recorded in publicly distributed ledgers.   But where are these publicly distributed ledgers?

There is no central authority that records the blockchain transactions.  As a digital currency, the bitcoin exists on the ledger itself - the ledger doesn't merely record the transfer of a currency.   The blockchain ledger can be accessed on multiple sites.   For example, this blockchain ledger available on Block Explorer:

. . . is the same as this ledger available on blockchain.info:

Note that the time and byte size are the same, as well as the hash values. 

About 6-10 times an hour a block is published which lists verified transactions - which bitcoins have been spent.

See: https://blockexplorer.com/blocks

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Sean O'Shea has more than 15 years of experience in the litigation support field with major law firms in New York and San Francisco.   He is an ACEDS Certified eDiscovery Specialist and a Relativity Certified Administrator.

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