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Bitcoin Use-cases: Turning Bitcoin, Cryptocurrency, and the Blockchain into a Fully Functional Peer-to-Peer Internet

Posted on December 18, 2013 by jessestay

A lot of non-Bitcoin investors and people with little knowledge of Bitcoin are freaking out right now about the fall of Bitcoin’s value in the last 24 hours due to China forbidding deposits into their main Bitcoin exchange. I’m actually kind of excited about it, because I think of Bitcoin as more a protocol than I do a currency. This means it has long-term sustainability. It also means my investment into it is a much more long-term investment into the future of the internet, as a whole. It means I now have an even greater opportunity to buy until the world grasps onto this concept. One of these use-cases is the possibility of completely replacing the internet as we know it. Let me explain.

DNS

Let me start with an example. An exact duplicate of the Bitcoin protocol with a separate blockchain, Namecoin (read all about it here), was created to prove some of the points I’m making here. Namecoin was invented to allow the use of its own Blockchain (remember, the worldwide, public accounting ledger for tracking transactions) to track ownership of domains on the .bit namespace.

Domains and DNS are in essence based on a peer-to-peer network of their own, with one major flaw. They rely on a central authority called the Internet Consortium for Assigned Names and Numbers (or ICANN) to tell other DNS nodes who owns the domain being queried. When you type in a URL into your browser, it likely searches your ISP’s DNS servers (your computer is in essence itself a DNS node that knows to talk to your ISP and other DNS nodes on the internet). Those DNS servers communicate with other DNS servers and so on until they find out who the owner of the domain is. Once the owner is determined through ICANN, your browser knows to pull content from “X Server” and you are delivered a webpage from that server. With Namecoin, however, ICANN isn’t needed because the ownership is recorded on the blockchain.

Namecoin, in essence, is replacing the need for ICANN in domain distribution for the .bit top level domain. They do it by storing the domain names in digest form on the blockchain (and suggest you can do this with other types of documents and text, as well), giving a permanent place to look up ownership with guaranteed authenticity. Currently they’re integrating this with existing DNS architecture, providing translation of those blockchain records in a way ICANN can understand, but in the future, the DNS protocol could be updated to accept blockchain records as sufficient ownership as well. This could be done with something as simple as a browser extension or plugin on most current browsers that overrides the browser looking at DNS servers for ownership, instead looking at the blockchain for ownership.

This is a powerful concept, which shows one use-case in this potential “internet replacement”. And it’s already in place, and it’s already working! You can invest in Namecoin now, and even convert your Bitcoin into Namecoin through exchanges like btc-e.com. (and guess what, the Chinese now don’t have this opportunity, at least not to the scale they used to!)

Storage

So now we have a way to tell where to retrieve content on the internet through a peer-to-peer, Bitcoin protocol-based architecture. Now we just need a way to deliver that data in a distributed manner. What if you could use Bittorrent as the storage for a Bitcoin-powered internet? We’re already headed there.

Recently, a bittorrent client called Frostwire announced they’re working to integrate Bitcoin into their Bittorrent client, allowing seeders of Torrents (which don’t all have to be illegal, by the way – Bittorrent, too, is just a P2P protocol, this one focused on storage) to pay and receive Bitcoin for files. I think this could go further though. What happens when you can associate something like Namecoin with an address of an HTML file on the Bittorrent network? Now, entirely server free, a document can be served (no server-side code required in this case – JavaScript has become quite powerful of recent on client machines, and could be extended even further to more powerful functions within the browser itself to embrace the blockchain and even bittorrent for more info) across a peer-to-peer network delivering documents to your browser at speeds potentially even faster than your current internet can.

As for a database, there are already distributed, file-based databases (see Hadoop, for instance). Instead of owning your own servers to store those files, why not store them across the P2P Bittorrent, or similar network? There are details to be worked out, but the technology is definitely almost there.

The Network Infrastructure

Now the only thing left is the ISP, and infrastructure for giving you bandwidth and access to your internet. What if we made this peer-to-peer as well? There are already many plans in foreign countries for “mesh” wireless networks. What if we took a concept like this, allowing anyone who wanted internet access to set up a wireless receiver of some sort, and that receiver would “pay” into the network to get access using Bitcoin or similar. These payments (this would be the equivalent of “mining” in current Bitcoin) would then go to those willing to provide longer distance wireless access using things like Ham Radio towers and the like to provide access over this entirely wireless, peer-to-peer internet. The bandwidth each node provides to the network would in essence “mine” new tokens and recycle those paid into the network in the process.

Of course, details of how all this can work still need to be worked out. Hopefully now you can see the potential though, and we’re really not that far from something like this happening with very little needing to be done by any central entity (perhaps wireless laws in the USA and other countries would need to be opened up a little to the public). Many of these protocols are already being used. But once they’re all put together, we have an internet that works without central authority, no need for ISPs, no need for server hosting. The entire internet experience is 100% controlled by the user, and companies will need to adapt to this.

This will all lead towards new forms of commerce. My friend Jeremiah Owyang talks about “The Collaborative Economy“, which is already occurring. The idea is that the future of commerce is moving towards more social, consumer-to-consumer models instead of business-to-consumer. Businesses now become facilitators of these transactions instead of sellers of a single product that a consumer can buy.

In “The Chain” era it works the same way – no longer will we need DNS, hosting, or even storage. Ownership records will all be stored on “The Chain”, all delegated to the proper owners of the content and storage and names. Businesses will need to start preparing for this in order to adapt to this new model – I’m actually seeing some of the smart ones do this now, which I’ll talk about later on this blog.

Bitcoin is not just a currency as you can see. If you’re seeing it as just a currency that goes up and down, you’re looking at it wrong. Instead, you should be looking at it as a new paradigm. It’s a paradigm shift in not just currency, but the entire internet as we know it, and you should be looking to hop on, pay in, and get on board. Those that do so now will be the leaders of this new era in the next 5 years.

My company helps businesses adapt to these new paradigm changes such as Bitcoin, strategizing new innovation and marketing shifts to gain an edge on their competitors. If you think we can help, contact us (contact@staynalive.com) – we even take Bitcoin!

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The Blockchain and the "All for One, One for All" Demise of the Centralized Server

Posted on November 26, 2013 by jessestay

It’s amazing how history repeats itself. Internet history began with the conception of room-filled mainframe computers and “nodes” that would connect directly to the mainframes relying solely on the power of the central mainframe to get their signal and perform various tasks sent to the mainframe. Then came the PC era – an era where every person could have their own computer, and the processing power occurred on the same machine as the display and input device. Following that came the Internet, or World Wide Web, which combined mainframes and servers with personal computers. With the internet, mainframes and servers could be used to connect PCs, all over the world, in a distributed network of various servers all communicating with each other, and relaying information back to the client, the PC.

With the Cloud, we’re back to relying on servers, and we’re relying more on central data storage and processing more than ever before, just like the days of the mainframe. The only difference is our current “dumb terminals” can also cache pieces of information and perform mini processes to reduce the need for internet bandwidth in the process. All of that is about to change though with “The Chain” era as I call it, cryptocurrencies, and blockchain type infrastructure. In this era, we’re moving from lots and lots of servers all over the world, to one single server, distributed across multiple clients (or terminals) all doing their fair share of the processing.

With Bitcoin, I’ve talked previously about the power of “The Blockchain”, a global, worldwide accounting ledger that gets audited over and over again by a massive network of peer-to-peer computers, or “miners” to verify the chain has not been corrupted in any way. This network, as I stated earlier, when put together as a whole, is more powerful than the top 500 supercomputers in the world, combined. The network was designed this way.

In Satoshi’s whitepaper where he proposed the Bitcoin protocol, he suggests “as
long as a majority of CPU power is controlled by nodes that are not cooperating to
attack the network, they’ll generate the longest chain and outpace attackers”. As a result, it’s to Bitcoin’s benefit to have a very large pool of honest miners, preventing the possibility of another majority outnumbering the honest miners and providing a false version of the blockchain. This makes for a very, very large public “server”, with lots and lots of computing power, that anyone, and anybody can rely on without the need for central companies, corporations, and even governments in many cases to provide that service with their own powerful servers. In many ways it means it’s near impossible to “lie” or “spoof” inside this type of network!

Imagine the opportunities this opens up. Server resources, DNS, hosting, and even storage servers are no longer a necessity. Instead we can all rely on “The Chain” to access this information. If I own a domain, that record exists on the Chain and the Chain can verify I own it, and any IP information that comes with it when a browser makes a request for that domain. Perhaps IP addresses will no longer be needed at all with the Chain – after all, servers won’t be necessary and I really believe this massive network could be used for storage as well. So maybe your browser also gets knowledge of another key on the chain that contains the content of the webpage.

Of course, all this is theory, but the implications are evident. I’m still weeding out how a lot of this could work in my mind, and so are many, many others. The potential is there though, and we already have the largest supercomputer on the planet that we could be using – the Blockchain used by Bitcoin – we just need to come up with new ways of using it (and many are), and identify the flaws so that we can either fix them, or come up with a new protocol without those flaws. One thing’s for sure in my mind – centrally-controlled servers, in the future, will no longer be necessary. Instead, we will all rely on a massive, P2P network of some sort – be it Bitcoin and the Blockchain itself, or some other open and distributed cryptocurrency model adapted to allow this stuff.

The collaborative economy doesn’t apply just to goods and services. It also applies to technology. The future will be less of a “one-to-one” or “one-to-many”, and more of an “all-for-one”, “one-for-all” model where everyone benefits that participates, and there is no fraud in the process. In the coming weeks and days I’ll share some potential use-cases for this Chain to further show some of its potential. What other use-cases can you come up with using the Chain?

Like this article? It’s freely shareable and can be copied and distributed (or linked to) via Creative Commons Attribution license. Or, just send a tip via Bitcoin!:

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First the PC. Second the Web. Third the Cloud. And Now…The Chain – Why Bitcoin is Not Just a Currency – It’s a Platform!

Posted on November 23, 2013 by jessestay

What if you could transfer stock to another individual, without a stock broker or stock certificate? What if you could sell your home, without a real estate broker or deed? What if you could sell your car without need for a title or vehicle registration? That’s the concept of the technology behind Bitcoin, and why you need to be paying attention to why this is so much more than just a currency or investment, and why your brand could be disrupted soon if it does not adapt.

The technology behind Bitcoin, the currency that is making little-known software developers millionaires as the price has gone from less than $1 per Bitcoin to $800 per Bitcoin in just a couple years, has the potential to revolutionize the way the world authenticates human-to-human transactions within a matter of years. The technology, or protocol, is called “The Blockchain”, and it has the potential to be so much more than just a currency-driven protocol. It’s an entirely new platform. “The Chain”, as I’m now calling this platform, is incredibly powerful, and I truly think it is a paradigm shift on par with the shift from the mainframe to the PC, the PC to the Web, and more recently the Web to The Cloud.

“Colored Coins”

I had the chance to sit down with some of these Bitcoin millionaires and soon-to-be-millionaires (I’m not exaggerating!) at a local event in Provo, Utah (organized by my friends from the upcoming documentary, “Life on Bitcoin“) called a “Bitmob”. The idea is this (in a nutshell): a group of Bitcoiners approach a local business and tell them they will bring x number of people willing to pay with Bitcoin if the business will be willing to accept it. It’s a great way to get businesses to start accepting Bitcoin as a currency, brings a lot of new customers to those businesses, and overall improves the economy of Bitcoin as a whole.

It was at this meeting that my mind was enlightened that Bitcoin is not just a revolutionary, worldwide currency without central control, but it is so much more than that. A group of developers in the Bitcoin community have proposed an addition to the Bitcoin protocol (introduced by a pseudonomous developer named “Satoshi Nakamoto” in 2008, but with precedence in other standards and technologies prior to that), which allows each Bitcoin transfer to contain a payload of text. They call these “Colored Coins“. This payload of text could be synonymous with writing on a $1 bill the words, “I’ll give anyone who gives me this bill a car”. Then, that person would be held to giving each person that gave them that $1 bill a car. However, attaching this to an encrypted digital transaction that can be guaranteed as authentic, traced between the sender and recipient (by code, not necessarily ID of a human – one fatal flaw in Bitcoin IMO), now you have an even more certain guarantee of that agreement that the entire world can audit and ensure took place. If it is dishonored, the entire world knows (instead of just the people that gave the individual the $1 bill). See this video to get a better idea of how their proposal works – it does a much better job explaining:

Bitcoin is Just One Implementation of The Platform (The Chain)

The power of why this is possible lies in a worldwide “ledger” called “The Blockchain“, basically a ledger similar to an accounting ledger, that each bitcoin client has access to, can’t delete, and proves the transaction takes place. Because the entire world has access to this ledger, there is no mistake in the transaction, and anyone can prove that the owners of the 2 sides of the transaction are in agreement with each other.

The power of Bitcoin is in a vast, worldwide network of connected computers that can all authenticate what agreements were made from which parties. Each of these computers performs computer algorithms to ensure the strength of encryption on each transaction, further ensuring its authenticity. I’m told that if you added all this computing power worldwide, it would equal the power of more than 500 of the world’s top super computers. The number of trades on the network, today alone, outnumbered the number of transactions on Paypal, and are soon to outnumber the number of transactions by Discover Card.

The sheer number of participants in this worldwide peer-to-peer network, the value attached to each transaction (in Bitcoin – the Bitcoin-to-Dollar ration today is approximately 1/$700 and growing), and most importantly the openness of the network, the Blockchain, and the protocol behind it make this new network designed for commerce as scalable as the Internet, and perhaps even more valuable. As you can see, it can also be used for more than just monetary trade. One individual is using it for authentic transfer of files between individuals, for instance.

The thing is it’s the idea of Bitcoin and the Blockchain that makes all this so powerful. There will be numerous additions to the protocol over time, and I’m sure other versions, making this concept more and more powerful. What’s powerful isn’t that Bitcoin exists – it’s that this is the direction it is taking us as a society, and the technology exists today. For that reason this is a very large platform that will have many components to it, just like the web has HTTP and TCP/IP and MAC addresses, and even OAuth, and OpenID that all work together in one. We’ll see the same with cryptocurrency and online commerce in ways that transform commerce and corporate structure as we know today. There are already other cryptocurrencies like Litecoin and Namecoin. Devs and businesses will create their own currency exchanges (I’ll explain that in another post).

Bitcoin is Much More Than Just a Currency

For that reason I see Bitcoin as much more than just a currency. Bitcoin is an open platform designed for commerce. It is the architecture and Infrastructure for all transactions that Jeremiah Owyang mentions in the Collaborative Economy philosophy. Whether in “colored coins”, or another standard, Bitcoin, and cryptocurrency in general, are the platforms that will power every guaranteed human-to-human transaction on the planet. It’s already globally recognized. Each transaction has an intrinsic value (Bitcoin itself is limited in number, giving it rarity, similar to Gold). Each transaction can be proved, with 100% accuracy. And it’s near impossible to forge, unlike traditional currency. And what’s even better is this is all a platform which will evolve and grow, just like the internet.

Bitcoin is what happens when you apply digital and cryptographic principles to accounting. This is as big a change in technology to come to the world as the PC, the Web, and most recently the Cloud. We are entering a new era of human-to-human commerce where the brand, and the government is no longer “the middle man” in these agreements. Is your business ready to handle it? Are we pushing our governments to adapt? I’ll do some articles shortly on ways brands can adapt, and what I’m telling my clients.

Want to know more about Bitcoin? This video will get you started!:

Like this article? It’s freely shareable and can be copied and distributed (or linked to) via Creative Commons Attribution license. Or, just send a tip via Bitcoin!:

Address: 19AdCAbjshRuEFhx4py1Ny7i48s1d6RFi