Top Crypto News – 23/05/2018

MIT Is Testing A Smart Contract-Powered Bitcoin Lightning Network


An MIT test is providing a rare glimpse of how bitcoin might truly work at scale.

Revealed to CoinDesk last week, the prestigious U.S. university has been quietly demoing an experimental use case for bitcoin’s lightning network, one that showcases how it might be combined with smart contracts to not only handle millions of transactions, but do so with a greater degree of complexity.

Modeled within the school’s Digital Currency Initiative, started in 2015 as a way to further R&D on cryptocurrencies, the test envisions a system wherein transactions would take place automatically in the case of defined external events, based on say today’s weather or the current price of U.S. dollars.

This is possible due to MIT’s creative use of so-called “oracles,” trusted entities meant to broadcast data to smart contracts. For this demo, researchers Tadge Dryja and Alin S. Dragos built a test oracle to broadcast the recent price of U.S. dollars in satoshis, the smallest unit of bitcoins, which anyone can grab and use for their smart contracts.

It’s a notable step forward for the idea, one first proposed by lightning inventor Dryja last summer. However, this is the first time it’s been implemented as a prototype with working code.

Dragos told CoinDesk:

“We built this as a standalone feature of our lightning network software. We chose data what we thought would be cool, U.S. dollars, but it could be any data you want, whether weather or a stock.”

Dragos stressed that the demo is “experimental” and “shouldn’t be used for real money.” That said, he and other MIT researchers are convinced that with the help of the lightning network, bitcoin might one day scale to capacities originally envisioned by its early users.

As part of that work, MIT researchers have already created an implementation for the lightning network called lit, and this oracle code is an add-on of that work.

“We at DCI, we really believe in the lightning network,” Dragos said. “Bitcoin doesn’t scale very well. I decided there has to be something better. Turns out what’s better is lightning. It’s the way to scale.”

Bitcoin smart contracts

But while lightning provides scale, smart contracts add other new functionality to bitcoin. For example, should the tech in MIT’s test be implemented, you could make some sort of a bet based on what’s happening in the world.

Or, in this case, a futures contract. Alice promises to pay Bob whatever the price of dollars is in satoshis on a certain day, say Friday. If a dollar is worth 12,150 satoshis by the end of the week, then she will end up paying that.

It’s a kind of advanced smart contract use case that is usually not associated with bitcoin.

“When folks think smart contracts, they think ethereum. Their scripting language is much richer,” Dragos admitted.

But, he argues that with some workarounds, bitcoin can do the same thing.

“It’s not as developer friendly because bitcoin didn’t go in that direction, but you can use it. You have to be a little creative,” Dragos said.

In short, it uses Dryja’s “discreet log contracts” scheme to broadcast data to the smart contracts. One of the most important advantages of this scheme is scalability, because most of the data doesn’t need to be stored on the bitcoin blockchain.

The other is privacy, since oracles don’t have any way of knowing who’s using the data they’re broadcasting.

“We’re introducing a model where oracles are not aware of who’s using the data they’re using,” Dragos said.

Some ‘quandaries’

But while this simple demo is now complete, Dragos and Dryja think there are many outstanding questions and “quandaries,” as Dragos put it. “From the individual oracle’s perspective, they’re going to want to make some money. We’re going to have to understand that,” Dragos said.

Another is that the oracle at this point is trusted. But there might be a way to minimize this trust by allowing a user to use many oracles at once.

But there’s a certain point where MIT DCI hopes to stop working on the technology and pass it off to someone else.

“We’re working with companies that might implement this,” Dragos said. And though he couldn’t name names, he mentioned they are “big company” partners of the DCI.

The hope is these bigger companies will be better at understanding what normal users want from the software. So, while MIT DCI built a prototype demonstrating how the underlying technology really works, they haven’t produced an app as mindlessly easy to use as say, Venmo or Facebook.

“UX is not our core expertise,” Dragos said.

Now it’s open for people to use for whatever oracle data they want. So, it’s up to the community to decide if it’s worthwhile to use or not.

“It’s a hard guess. It could be a significant deal if people use it. But we don’t know what people are going to be using it for,” he added.

Dragos stated:

“New technologies are available all the time, that doesn’t mean they end up making it though.”

Lightning image via Shutterstock
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Bank of America Patents Blockchain Security Tools



Bank of America has won a patent for a way to control access to certain aspects of a permissioned blockchain network, newly published documents show.

The patent for a somewhat innocuously titled “system for managing security and access to resource sub-components” explains how security tokens (essentially electronic keys, distinct from blockchain-based assets that mimic physical securities) would be used to grant access to certain users to the information contained in a particular block. According to the text, the system would be automated, effectively meaning that the network itself would grant and track access.

Bank of America was awarded the patent on May 22, according to the US Patent and Trademark Office (USPTO). It represents the latest intellectual property development for the bank, which has filed many blockchain-related applications in recent years.

The focus on security and data privacy is perhaps unsurprising, given the sensitivity of the information that Bank of America might look to transmit across the networks. And it speaks as well to the wider issue of security in the crypto space today, given the all-encompassing need to keep private keys safe from malicious actors.

And, as Bank of America itself notes in the patent document, “with the advent of distributed/decentralized blockchain networks … a need exists to develop systems … that manage control over blocks of resources.”

The bank explained:

“A need exists to provide designated entities/users the ability to readily identify blocks that are relevant to the designated users’ concern and, once blocks have been identified, security features that assure that the designated entities/user that are accessing the blocks are, in fact, authorized users.”

According to the text, the automated features would have the ability to grant access to the blockchain network for certain periods of time, depending on the scope of a user’s reason for plugging in.

“Moreover, a need exists to control the access given to the designated entities/users, such as, by way of example, control over the period of time during which a designated entity may be granted access and/or the amount of access granted to the designated entity/user,” the patent doc noted.

Bank of America image via hans engbers / Shutterstock
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Economics Nobel Laureate Robert Shiller Examines Bitcoin in Historical Context


Historical Precedents

Economics Nobel Laureate Robert Shiller Examines Bitcoin in Historical ContextThe main question Shiller was trying to answer is how cryptocurrency users can maintain a high level of enthusiasm in the face of constant warnings that it’s all just a big scam. Instead of comparing bitcoin to past technological solutions, as has been done many times before, he puts it in the context of time-based and electricity-backed experimental forms of alternative money.

Putting the technology of Bitcoin on the same level as primarily political movements, he also compared it to attempts to reshape how governments and economies operate. And while novel ideas by communist and technocratic thinkers have failed, the Euro – which was devised to help unite former warring nations – is still around.

Revolutionary Zeal Is Not Enough

Economics Nobel Laureate Robert Shiller Examines Bitcoin in Historical Context
Nobel Prize Laureate Robert J. Shiller

After reviewing these past examples, Shiller explains that: “Each of these monetary innovations has been coupled with a unique technological story. But, more fundamentally, all are connected with a deep yearning for some kind of revolution in society. The cryptocurrencies are a statement of faith in a new community of entrepreneurial cosmopolitans who hold themselves above national governments, which are viewed as the drivers of a long train of inequality and war.”

“And, as in the past, the public’s fascination with cryptocurrencies is tied to a sort of mystery, like the mystery of the value of money itself, consisting in the new money’s connection to advanced science. Practically no one, outside of computer science departments, can explain how cryptocurrencies work. That mystery creates an aura of exclusivity, gives the new money glamour, and fills devotees with revolutionary zeal. None of this is new, and, as with past monetary innovations, a compelling story may not be enough,” he concluded.

Whether it’s true or not that only computer scientists understand cryptocurrencies today, it is certainly accepted that having a story is not enough by itself, which is why bitcoin entrepreneurs continue to work on exciting use cases that are only made possible with this revolutionary technology.

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UK ‘Cryptoassets’ Task Force Plots Path Forward at First Meeting


The U.K.’s recently created Cryptoassets Taskforce has taken the first step on its mission to “develop thinking and policy” around blockchain and cryptocurrency.

An inaugural meeting held yesterday saw the group agree on a series of objectives which, according to a post on the website, include assessing the impact of cryptocurrencies, the “potential benefits and challenges” of adopting blockchain technology in the finance sector and determining if – and what – rules might be needed in response to those enquiries.

As reported by CoinDesk, the Cryptoassets Taskforce was first announced in late March by Philip Hammond, the Chancellor of the Exchequer, as part of the government’s Fintech Sector Strategy – an initiative aimed to make the U.K. “the best place for Fintech business.”

According to Dave Ramsden, deputy governor of the Bank of England, blockchain technology has the potential to deliver benefits to both the financial system and the British economy.

He added:

“This taskforce will enable us to work closely with the Treasury and the FCA to explore how the opportunities posed by these technologies can be realised, while also tackling the risks arising from cryptoassets.”

The taskforce – which includes the Bank of England, the Financial Conduct Authority and the Treasury – will review existing research from the government and regulators, as well as seek input from trade bodies, academia and consumer and investors groups.

The group will host a roundtable discussion in July and publish its first report in the third quarter of the year.

Bank of England image via Shutterstock
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