blockchain

Microsoft is leveraging blockchain technology to create a trustless digital identity scheme, but its not launching a token or building a private blockchain to do so. Its building on Bitcoin instead.

Announced on May 13, 2019, Project ION is an open-source, Layer 2 network built out of the public key infrastructure protocol Sidetree. In practice, “it is akin to Lightning, in that there is no secondary consensus among ION nodes,” a source close to the network’s development told Bitcoin Magazine.

“This is just like Bitcoin, but for IDs,” the source said.

The idea here is to make user names obsolete. Instead of logging into Facebook, email or any other application with a username, users can use a digital decentralized ID (DID) instead. This DID, like a private key when signing a transaction to the Bitcoin network, proves ownership. Individual ION nodes on the secondary network will be responsible for keeping track of these DIDs and timestamping them onto the Bitcoin blockchain for reference and attestation.

To create an ID, a user would wrap a public key into a DID creation document on the ION network, signing this input with their private key and sending it to a node on the network. This ION node then archives the metadata (without accessing the data itself) as a DID document for other nodes to reference. To set ownership of the DID in stone, the node batches reference hashes for all of the DIDs it has received into an OP_RETURN transaction and anchors it to the Bitcoin blockchain (this can be done on a variable schedule, either every block, every few blocks, etc.).

Every time a user updates their DID state — by creating a sub-ID or updating metadata, for example — the corresponding node updates these changes in the DID document. And whenever a batch is anchored on the blockchain, each ION node, which is constantly monitoring the blockchain, will identify the hashes as originating from the ION network. They’ll then pluck this transaction batch from the network, reference the DID documents in the nodes that sent it and sync up with the latest states of the IDs to keep the network up to date. Nodes can choose to batch transactions and monitor the chain, while others that wish to cut operation costs may simply monitor the chain to keep DID states up to date.

“Unlike money, decentralized identifiers don’t have the same doublespend problem,” the source told Bitcoin Magazine. “All we need is chronology.”

This chronology is the key to DID owners proving that the most current state of a digital identity belongs to them. In practice, it would work like this: When sending a DID to a verifier, this party would challenge a user to resolve the state of this identity with its corresponding DID document on the network to prove ownership. This can only be done using a secret value given to the DID owner when the identity is hashed onto the blockchain, and only an owner can resolve or update a DID’s state using this value.

Users can create various identities under this schemata for any number of use cases. ION’s DIDs could be used for zero-knowledge, proof ID verification in bars, for example, or it could be used for membership programs with hotels and airlines — there’s also innumerable use cases for signing into online services.

The source emphasized that, while Microsoft has been developing the technology, it’s open source and anyone can run a node. Plus, the legacy computer company won’t charge a fee for the service.

According to the announcement, a handful of companies have shown early interest in running ION nodes, including Bitcoin hardware and security firm Casa, data center Equinix and internet security company Cloudflare.

Electronics company HTC has announced that it is launching a smartphone to bring crypto and blockchain technology to a wider audience in Q3 2019.

According to a press release shared with Bitcoin Magazine, “The EXODUS 1s will be the first smartphone ever to have full node capabilities” containing the full Bitcoin blockchain.

“With the EXODUS 1, we gave people the power to own their own keys, now we’re giving people the power to run their own node,” Phil Chen, decentralized chief officer at HTC, told Bitcoin Magazine. “It’s about building technology for the free world.”

Without going into specifics, Chen added that he has been working on the project “for some time” and that the largest hurdle was “developing a device that can act as a true full node and hold the full Bitcoin blockchain on the device.” He believes that this goal has now been met.

Chen also described some of the phone’s technical challenges.

“The full Bitcoin blockchain is around 200 GB [and] increasing at about 60 GB per year,” he said. “The full ledger can also be pruned down to approximately 10 GB.”

The phone can support the pruned version at all times, but the use of the full blockchain will require an additional SD card. Additionally, it is recommended that users only run a node off of a stable Wi-Fi connection due to the large data requirements and have a way to recharge the phone on hand.

Chen claimed that “the phone will not be able to mine for bitcoin itself, but we have upcoming partners to announce that will offer hashrates.” The Bitcoin ecosystem relies on both mining activity and the operation of nodes, but Chen observed that mining is much more strongly incentivized. Ideally, the means of running nodes like this with a low cost of entry will help invigorate the overall system.

“Running a node is maybe the most important part of the blockchain as it helps secure the network; every one of them acts as an authoritative verifier of every single transaction of the block,” said Chen. “We first empowered the user by owning their own keys and now we’re focused on empowering the user to run their own node to help secure and grow the network.”

Ideally, the presence of nodes like this will also increase blockchain app operation. According to the press release, additional technical details will be available closer to the product’s commercial release.

Decentralized autonomous organizations (DAOs) are one of crypto’s more novel and ambitious applications — one that Bitcoin, until recently, has had nothing to do with.

In practice, they’re a bit younger than Bitcoin forks and older than smart contract-focused blockchains. The idea is that you can devise a decentralized governance system using the blockchain’s cryptographic controls — rule of code, so to speak. Using tokenomics and technical schemes, the DAO affects certain laws over its participants, incentivizes them to play by the rules and encourages the community to hold itself accountable.

Dan Larimer’s BitShares, with its delegated proof-of-stake consensus mechanism, was the first DAO, followed by Dash. Since these trailblazers went live, DAO endeavors have become dominated by the Ethereum ecosystem, including, most notably, the eponymous and disastrous The DAO — best known for forfeiting millions in ether to the void after an incompetent coder unwittingly deleted a wallet library — and Maker, among others.

Perhaps because of Bitcoin’s limited scripting language and, conversely, Ethereum’s rich scripting language, Ethereum has been the frontrunner for popular DAOs in recent memory, while one has never launched on the Bitcoin blockchain.

Until now, that is.

Bisq Gets an Upgrade

Bisq, one of the Bitcoin community’s only truly decentralized exchanges, introduced version 1.0 of its software this week. Along with other ancillary upgrades, the release dropped a bombshell by furnishing Bitcoin with its first DAO.

“Bisq’s DAO, launched on Monday, April 15, is (to my knowledge) the only attempt of its kind to decentralize a project’s management and funding to the extent it does,” Steve Jain, a Bisq contributor, told Bitcoin Magazine.

With its intention to migrate toward distributed governance, Bisq will strive for an even greater degree of decentralization than it already features. Its software operates on Tor, and each user must run their own separate instance of the program (akin to running a node on a much smaller scale) to access the exchange, making it completely peer-to-peer.

The privacy-minded exchange offers a rare, KYC-resistant fiat ramp for bitcoin trading, allowing users to facilitate fiat exchange with payment apps, bank wires and even hard cash swaps, like LocalBitcoins offers. With each trade, bitcoin is locked away in multi-signature contracts, requiring arbitrators to resolve any conflicts should a dispute arise in a trade.

Jain said that this version upgrade was a long time coming.

“The DAO was intended to be a part of Bisq from the day it was first conceived in 2014,” he revealed, adding that this launch has been in the works for five years — meaning that its development predates even the infamous Ethereum DAO. Now that it’s live, he believes that the program has realized an even truer version of itself, one that separates it from the pack.

“From this standpoint, Bisq is a totally different beast —in terms of software and governance — than any other exchange,” he claimed.

How the DAO Works

Bisq’s governance will revolve around a token, but speculators need not apply — the project isn’t launching an ICO. Instead, each BSQ token will be minted through a process known as coloring.

Colored coins, so-called because they are distinguished from regular coins on the blockchain, are simply satoshis marked for a specific use case. To create tokens for Bisq, for example, users submit satoshis to the DAO, which are then “painted over” to represent BSQ. These tokens give users the ability to participate in the Bisq DAO.

This participation can take many forms. For traders on the platform, BSQ will give them trading discounts, not unlike BNB coin for Binance users, but this token’s use case is more dynamic than that. Contributors, for instance, can submit a compensation request to the network for payment in BSQ after finishing a project for the DAO. The community then votes on whether or not compensation should be awarded, and the developer submits satoshis to mint the colored BSQ tokens.

More than just developers, DAO contributors could be designers, support staff, social media managers or writers. These contributors can also stake BSQ in a bond to fill a high-trust position in the DAO, like a back end engineer, copywriter or social media representative. If these de facto employees are caught slacking off or acting up, the community can confiscate their stakes as punishment.

“It’s a dynamic system of stakeholders acting in their own best interests … And notably, there are no gatekeepers to manage it all,” Jain said. “BSQ is bought on the open market, and it’s issued by collective stakeholder voting. Personal vendettas, bank tantrums, government policies, company rules … none of these things can get in the way of someone doing work and getting paid for it.”

To start, 3,657,480 BSQ has been minted to compensate a team of more than 200 contributors for their five years of labor to get Bisq and its nascent DAO up and running. Going forward, Jain told us that new BSQ will be put into circulation every month to fulfill compensation requests. Any BSQ used for trading fees, on the other hand, will be burned and taken out of supply entirely.

Should I Trust the Government?

For some, the DAO’s attempt to realize cohesive-yet-anarchic governance is utopian at best and foolhardy at worst. Critics point to Ethereum’s DAO and the ensuing hard fork as a bailout of sorts — the crypto equivalent of the windfalls Washington bestowed on Wall Street during the Great Recession.

Other criticisms point to the notion that incentives aren’t powerful enough to keep bad actors in line, or that governance systems, depending on structure, give these bad actors mechanisms to game the system and circumvent checks and balances.

Bisq’s own governance is twofold. Voter clout is determined on a weighted basis (how many BSQ tokens you own) or merit (your reputation on the network). Voting based on token count is a red flag for many — it’s one of the reasons people look at EOS’ block producer elections as a pay-for-play playground, for instance. When asked if he felt that a stake-based voting model might enable vote buying and give the 1 percent an opportunity to out-influence the other 99, Jain noted optimism around the intentions of stakeholders.

“[To vote you must] allot a certain amount of the BSQ you own for your voting weight,” he said. “You must own this BSQ, and yes, you can buy as much of it as you want on the open market. We think that’s fair. Presumably, assuming no bad intentions, someone with a lot of money who really believes in the Bisq network may want to buy a lot of BSQ to have a big influence in its decisions.”

He continued to qualify that merit “is worth more than pure stake weight.” Basically, someone who contributes to the network has more of a say in voting than someone who bought their tokens; if I earn 10,000 BSQ tokens, for example, even if I sell them, my vote holds more clout than someone who bought 10,000 BSQ on the market. Merit will decay on an annual basis, as well, meaning contributors have to keep working on the ecosystem to maintain or bolster their reputations.

“Lastly, the merits ‘stack,’ so if I have 10,000 BSQ of merit and 5,000 BSQ in my BSQ wallet, I can stake 5,000 BSQ for a combined voting weight of 15,000 BSQ,” Jain said.

With this governance structure in place, Jain emphasized that one of the most significant — and exciting — differences with this version upgrade is that contributors can finally get paid for their work. This work, he continued, includes “growing liquidity, expanding to new markets and finally integrating SegWit.” Lightning Network integration is a bit further off, though, as it doesn’t fit well into Bisq’s complex architecture.

Even as the DAO is launched and Bisq has achieved a greater degree of decentralization than before, Jain said that Bisq’s community is “focused on further decentralizing the network.” This means a new trading scheme which removes arbitrators from the multisignature process and replaces them with mediators “for a more private, quick and decentralized trading experience where less trust is required.”

Ultimately, he concluded, the idea and final goal is that “users shouldn’t have to trust Bisq for anything.”

Decentralized autonomous organizations (DAOs) are one of crypto’s more novel and ambitious applications — one that Bitcoin, until recently, has had nothing to do with.

In practice, they’re a bit younger than Bitcoin forks and older than smart contract-focused blockchains. The idea is that you can devise a decentralized governance system using the blockchain’s cryptographic controls — rule of code, so to speak. Using tokenomics and technical schemes, the DAO affects certain laws over its participants, incentivizes them to play by the rules and encourages the community to hold itself accountable.

Dan Larimer’s BitShares, with its delegated proof-of-stake consensus mechanism, was the first DAO, followed by Dash. Since these trailblazers went live, DAO endeavors have become dominated by the Ethereum ecosystem, including, most notably, the eponymous and disastrous The DAO — best known for forfeiting millions in ether to the void after an incompetent coder unwittingly deleted a wallet library — and Maker, among others.

Perhaps because of Bitcoin’s limited scripting language and, conversely, Ethereum’s rich scripting language, Ethereum has been the frontrunner for popular DAOs in recent memory, while one has never launched on the Bitcoin blockchain.

Until now, that is.

Bisq Gets an Upgrade

Bisq, one of the Bitcoin community’s only truly decentralized exchanges, introduced version 1.0 of its software this week. Along with other ancillary upgrades, the release dropped a bombshell by furnishing Bitcoin with its first DAO.

“Bisq’s DAO, launched on Monday, April 15, is (to my knowledge) the only attempt of its kind to decentralize a project’s management and funding to the extent it does,” Steve Jain, a Bisq contributor, told Bitcoin Magazine.

With its intention to migrate toward distributed governance, Bisq will strive for an even greater degree of decentralization than it already features. Its software operates on Tor, and each user must run their own separate instance of the program (akin to running a node on a much smaller scale) to access the exchange, making it completely peer-to-peer.

The privacy-minded exchange offers a rare, KYC-resistant fiat ramp for bitcoin trading, allowing users to facilitate fiat exchange with payment apps, bank wires and even hard cash swaps, like LocalBitcoins offers. With each trade, bitcoin is locked away in multi-signature contracts, requiring arbitrators to resolve any conflicts should a dispute arise in a trade.

Jain said that this version upgrade was a long time coming.

“The DAO was intended to be a part of Bisq from the day it was first conceived in 2014,” he revealed, adding that this launch has been in the works for five years — meaning that its development predates even the infamous Ethereum DAO. Now that it’s live, he believes that the program has realized an even truer version of itself, one that separates it from the pack.

“From this standpoint, Bisq is a totally different beast —in terms of software and governance — than any other exchange,” he claimed.

How the DAO Works

Bisq’s governance will revolve around a token, but speculators need not apply — the project isn’t launching an ICO. Instead, each BSQ token will be minted through a process known as coloring.

Colored coins, so-called because they are distinguished from regular coins on the blockchain, are simply satoshis marked for a specific use case. To create tokens for Bisq, for example, users submit satoshis to the DAO, which are then “painted over” to represent BSQ. These tokens give users the ability to participate in the Bisq DAO.

This participation can take many forms. For traders on the platform, BSQ will give them trading discounts, not unlike BNB coin for Binance users, but this token’s use case is more dynamic than that. Contributors, for instance, can submit a compensation request to the network for payment in BSQ after finishing a project for the DAO. The community then votes on whether or not compensation should be awarded, and the developer submits satoshis to mint the colored BSQ tokens.

More than just developers, DAO contributors could be designers, support staff, social media managers or writers. These contributors can also stake BSQ in a bond to fill a high-trust position in the DAO, like a back end engineer, copywriter or social media representative. If these de facto employees are caught slacking off or acting up, the community can confiscate their stakes as punishment.

“It’s a dynamic system of stakeholders acting in their own best interests … And notably, there are no gatekeepers to manage it all,” Jain said. “BSQ is bought on the open market, and it’s issued by collective stakeholder voting. Personal vendettas, bank tantrums, government policies, company rules … none of these things can get in the way of someone doing work and getting paid for it.”

To start, 3,657,480 BSQ has been minted to compensate a team of more than 200 contributors for their five years of labor to get Bisq and its nascent DAO up and running. Going forward, Jain told us that new BSQ will be put into circulation every month to fulfill compensation requests. Any BSQ used for trading fees, on the other hand, will be burned and taken out of supply entirely.

Should I Trust the Government?

For some, the DAO’s attempt to realize cohesive-yet-anarchic governance is utopian at best and foolhardy at worst. Critics point to Ethereum’s DAO and the ensuing hard fork as a bailout of sorts — the crypto equivalent of the windfalls Washington bestowed on Wall Street during the Great Recession.

Other criticisms point to the notion that incentives aren’t powerful enough to keep bad actors in line, or that governance systems, depending on structure, give these bad actors mechanisms to game the system and circumvent checks and balances.

Bisq’s own governance is twofold. Voter clout is determined on a weighted basis (how many BSQ tokens you own) and on merit (your reputation on the network). Voting based on token count is a red flag for many — it’s one of the reasons people look at EOS’ block producer elections as a pay-for-play playground, for instance. When asked if he felt that a stake-based voting model might enable vote buying and give the 1 percent an opportunity to out-influence the other 99, Jain noted optimism around the intentions of stakeholders.

“[To vote you must] allot a certain amount of the BSQ you own for your voting weight,” he said. “You must own this BSQ, and yes, you can buy as much of it as you want on the open market. We think that’s fair. Presumably, assuming no bad intentions, someone with a lot of money who really believes in the Bisq network may want to buy a lot of BSQ to have a big influence in its decisions.”

He continued to qualify that merit “is worth more than pure stake weight.” Basically, someone who contributes to the network has more of a say in voting than someone who bought their tokens; if I earn 10,000 BSQ tokens, for example, even if I sell them, my vote holds more clout than someone who bought 10,000 BSQ on the market. Merit will decay on an annual basis, as well, meaning contributors have to keep working on the ecosystem to maintain or bolster their reputations.

“Lastly, the merits ‘stack,’ so if I have 10,000 BSQ of merit and 5,000 BSQ in my BSQ wallet, I can stake 5,000 BSQ for a combined voting weight of 15,000 BSQ,” Jain said.

With this governance structure in place, Jain emphasized that one of the most significant — and exciting — differences with this version upgrade is that contributors can finally get paid for their work. This work, he continued, includes “growing liquidity, expanding to new markets and finally integrating SegWit.” Lightning Network integration is a bit further off, though, as it doesn’t fit well into Bisq’s complex architecture.

Even as the DAO is launched and Bisq has achieved a greater degree of decentralization than before, Jain said that Bisq’s community is “focused on further decentralizing the network.” This means a new trading scheme which removes arbitrators from the multisignature process and replaces them with mediators “for a more private, quick and decentralized trading experience where less trust is required.”

Ultimately, he concluded, the idea and final goal is that “users shouldn’t have to trust Bisq for anything.”

RIF Labs has announced the integration of its public blockchain, RSK Smart Contracts, on Microsoft’s Azure Marketplace. The RSK Smart Contract Network is an open-source platform that seeks to extend the functionality of Bitcoin using smart contracts and the Azure Marketplace is an app store for Microsoft’s cloud computing service.

Prior to the integration, RIF Labs customers had to deploy local servers while manually setting up and maintaining nodes for running the blockchain. With the addition of RSK Smart Contracts on the marketplace, users can have an RSK blockchain network set up in minutes via Azure.

Adrian Eidelman, RSK strategist and RIF Labs CTO, believes the integration with Microsoft’s marketplace allows DApp developers to keep their focus on the product development now that node deployment has been settled.

“DApp developers can now focus on building their product, since they don’t have to worry anymore about spending hours in setting up and maintaining the node,” Eidelman explained in a company statement shared with Bitcoin Magazine. “Microsoft’s support will be key to accelerate adoption of RSK technologies and the Bitcoin ecosystem.”

RSK Smart Contracts is the latest public blockchain to be supported by the Azure Marketplace.

Sajan Parihar, director of Microsoft Azure, explained why the Azure marketplace is so pivotal for developers.

“Through Microsoft Azure Marketplace, customers around the world can easily find, buy, and deploy partner solutions they can trust, all certified and optimized to run on Azure,” Parihar said in the statement. “We’re happy to welcome RSK Smart Contracts to the growing Azure Marketplace ecosystem.”

RIF Labs’ integration with Microsoft will also prove crucial for the blockchain startup in the future, as it gets set to launch new protocol implementations for its RIF OS. The increased ease of setting up nodes will provide an opportunity to expand the RSK network for far less cost and storage space rental on the nodes themselves could provide the opportunity for developers to earn mining rewards.

In 2018, RSK Labs was acquired by RIF Labs, an acquisition that saw the smart contract platform expand beyond Bitcoin’s blockchain.