Heading into winter, save money on heat with Bitcoin

@Shoutout to cryptocoinsnews.com giving me my first byline and picked up piece :D - https://www.cryptocoinsnews.com/mine-bitcoin-save-money-heating/

Here in NY, heat is a big thing in the winter. It can get bitterly cold, and heating costs add up. Let's do some back of the envelope math to see if we can save money on heating those NY apartments. In a typically NY apartment we're talking 500-1500 sq/ft of living space. So for the purposes of this demonstration, let's use 1000 sq/ft as the magic number. Given that New York is a pretty cold climate, we're going to need about 4,000,000 BTUs per month of heat to keep that apartment warm. Here are the current rates for the common energy sources:

Electricty - $.20/kWh Oil - $3.60/gal Natural Gas -  $15/MCF

This gives us a very approximate cost per million BTU as follows:

Electricity - $60 Oil - $34.60 Natural Gas - $18.75

Which shows natural gas as the clear winner for heating our apartment at approximate cost of  $75/month during the coldest months. But what if electricity is our only option? (There have been several times where I have rented and the only available heating source was electricity. )

In that case it's a clear home run for the next contender: the bitcoin ASIC.

Bitfury ASIC

I won't go into too much detail, but essential it's a machine capable of producing bitcoins for the cost of electricity. The initial purchasing price of the device is also a factor.

From my own personal experience, it takes a gen I 100gh/s Avalon miner (600-1000w PSU) to heat that 1000 sq/ft apartment. It uses 14.4kWh of electricity per day - giving us a monthly cost of ~$86.4. This is without using optimization like thermostats to keep a consistent temperature. My method was to adjust the openness of my window.

Surely $86.4 can't compare to the $60 cost of electricity alone? Surely. But that's not all. The ASIC producing 100gh/s would have bestowed upon us some BTC during that month period. At the current price ($380) we're talking $15/month. It starts to get interesting.

On top of which, that gen 1 100gh/s ASIC is somewhat outdated. We can find used Avalons  on ebay that output 200gh/s for the same amount of electricity or less.  On top of this, there are or shortly will be chips on the market capable of 1W/Gh - which would offset the cost of heating entirely and then some (beating oil and natural gas.)

I believe we're now in the territory of ASIC heat being more efficient than traditional electric heating elements from a cost/btu standpoint. Play this out for a few years and we see the cloud moving to our baseboard heaters.

If you pay for your heat in NY - it probably pays to buy some ASICs. The value of bitcoin will go up or down, the hashrate similarly, but so does oil / gas. Right now it makes sense to heat with ASICs.

Bitcoin: after the beginning...

In my last post on this subject, I wrote about Bitcoin being the beginning of an extreme shift in culture. I anticipate that the shift could take 10-20 years to be realized, but there’s a lot of work that can be done to shorten it to 3 years.

The shift I imagine can primarily be described as decentralized voting, trustless identity/finance pairing, transparent government/public corporations/non-profits, DAOs, granularly controlled privacy for those who want it, and an overall reduction in crime, bureaucracy, and oppression. Additionally, the standard of living, especially in the developing work, will be dramatically much higher.

People in sub-saharan Africa and Latam (where reduction in poverty is vital) will have access to financial services, communication, organization and self-governance. There will be methods for the developed world to efficiently and effectively donate to causes where it is badly needed. Causes like mesh networks to facilitate communication, and food / clean water so that time can be spent on social infrastructure. Funding can go directly to those causes without being pilfered, and results can be more easily monitored for efficacy.

Percentage_of_poverty_in_the_world,_Mexico_colour_coded_corrected
Percentage_of_poverty_in_the_world,_Mexico_colour_coded_corrected

The first feature I was excited about with Bitcoin was its use as currency, value transfer, and value storage. For those who bank branchlessly - this technology alone is life changing. But decentralized ledger systems give us much more than that.

Decentralized voting is huge. Decentralized storage of information, identity, communication, law, business, and much more are all possible and real in the near future.

What most excites me is the ability to quantize the analog world we live in. By decentralizing these metrics in a publicly stored system, we can do some very cool data analysis. We can see if the aid given to Burundi can be categorized by source and destination. We can then see what works and what doesn’t.

Recently a representative from a global charity (one of the largest, with over $4.2bn in contributions in 2013) came to our office. He told us that one of the major issues in giving financial aid is that when it doesn’t go to the matron of the household - funds get spent by the males on alcohol and drugs. It is difficult to keep the men from stealing the funding, so the charities don't give financial aid to those households. If the money can be given directly to the women of the household, there is an overwhelming probability that she will make her family escape from the relative poverty.

There are many clear applications for where Bitcoin - and the more important underlying technology - can greatly benefit the world. Most of the applications we have considered closely parallel systems with which we are already familiar. The financial aid problem could potentially be solved with Bitcoin wallets for the women in need of financial aid. That’s not to presume that it’s a silver bullet, but it would create a very big difference in solving the problem. This example closely parallels some of the financial aid systems we currently use, but the distribution chain length and cost would be dramatically reduced. It is a more efficient version of what we already have. In many cases, efficiency to the point of being effective where it otherwise wouldn’t work. Reducing the distribution chain by 20 points of contact - to get to a family in need - is what it takes to be worthwhile.

As far as the example with Burundi of A/B testing methods of aid, there is not much like that available to us. Most people have almost no experience crowd-auditing what works because there simply is not enough high-quality data. This may be bordering on the spooky for most people, but that’s because we’ve been conditioned. Our conditioning has told us that centralized organizations control the information, our privacy is under attack and not theirs. We now have the tool to flip that scenario. We can responsibly shine more light on the structural inefficiencies of the world, the corruption, violence, poverty, and attempts at sweeping this stuff under the rug. At the same time we can reduce the need for reductions in personal privacies.

I’m hoping we can work together on this, I guarantee that if you’re reading this -- you can help.

Why I worked on CoinValidation

If you’re unfamiliar with CoinValidation, that about sums it up... It was never clear to begin with. There are several reasons for why it’s not straight forward, and below I’ll attempt to sort it all out. First let me say the following:

CoinValidation.com was an attempt to innovate in what we thought may be the most controversial side of Bitcoin; the identity layer. It is not a specific technology, the idea of whitelisting/blacklisting/xlisting whatever is totally off-base and was a rumor. Here is what CV really is:

It’s a thinktank.

It was an attempt by a small group of people to solve one of Bitcoin’s largest problems: no one was creating new technology in the identity layer of Bitcoin. We did not specifically want to endorse or profit from some piece of tech like blockchain analysis or whitelisting, etc. We simply wanted to explore what was possible. We found some interesting things, like tech that could reduce the risk of privacy loss in the standard KYC model. But that all went unheard because people thought we were trying to hurt user privacy or to affect fungibility.

People thought that we were building a for-profit startup focused on selling tech and user data wholesale... In fact, we were trying to do the exact opposite of that. It could best be described as a thinktank for the KYC and regulatory side of Bitcoin - which we had become familiar with during our time at Bitinstant.

Some of the ideas we explored and want to continue to explore:

  • How can Bitcoin companies comply with US regulations from a legal/tech standpoint?
  • What can Bitcoin companies do differently vs. typical financial companies, but still be compliant?
  • What is possible with blockchain analysis?
  • How can Bitcoin companies communicate patterns of fraud to each other?
  • How can ownership of assets be proven?
  • Can something like the MIT PGP database exist for Bitcoin addresses?
  • Is it unethical to build technology that enables Bitcoin businesses to tie into legacy systems?
  • How sensitive is the Bitcoin community to a group of people experimenting with what’s possible?

Here are some of the realizations we’ve had in exploring the above questions:

  • We facilitated the first underwriting of a mortgage to a bank as a proof of concept.
  • Bitcoin companies can comply with the regulations, and yes it is very limiting.
  • There are sophisticated ways that Bitcoin companies can communicate fraud patterns to each other.
  • That kind of communication could prevent another Mt. Gox type of failure, which is inevitably going to happen because it is not being addressed.
  • Blockchain analysis can be really scary.
  • Bitcoin is not anonymous in most contexts.
  • We designed a new way of hashing KYC data so that five points of attack can be reduced to two.
  • We found ways for companies to satisfy BSA requirements without having to store or transmit user information.

We stopped working on exploring these concepts because

A) No profit model translates to no funding. B) The community tried to burn us at the stake, hence no funding. C) I realized that I am not the best at public relations, and it's hard to convey what I want to convey.

I continue to work on innovations on the regulatory front, but for obvious reasons - not at the level I probably should.

Still, here is what I believe is possible for companies:

  • Satisfy regulatory requirements here in the US if they want to.
  • Do it in a way that risks user privacy much less than what is currently in place in the Bitcoin ecosystem.
  • Have a system with less fraud, better consumer protection and AML, and less privacy loss than what exists in traditional financial AND current Bitcoinland.

Now the fact that it is possible  - doesn’t mean I’m endorsing it. Working with regulations here in the US is not some lofty philosophical decision for me. Businesses are going to work within that framework regardless of my thoughts on it because that is what the market will dictate. I’m simply trying to help navigate that landscape responsibly... Even though my personal philosophies are often in line with those of libertarianism.

People are going to buy their Bitcoins in the most efficient and effective way possible to them. The path the masses take to acquire and use Bitcoins will be the one which has the best user experience, closely parallels what they are used to, and costs the least. The masses don’t care about Ayn Rand or crypto anarchy.

We can push the boundaries of what is possible if we can stop fighting and solve real problems. Problems like this:

  • Why are users giving their KYC information to shady companies?
  • Why is the community trusting $700 million to one dude with an exchange written in PHP in Japan?
  • What is being done to prevent that from happening again?
  • Why is multi-sig not in full effect on every wallet valued greater than $1000?
  • Why is the community already satisfying most of the regulatory requirements, kicking and screaming that they exist, and then doing almost nothing to realistically change it?

Real change takes real work, and it’s not going to get done if the people innovating are ostracized for thinking outside the box. Creating real change is a massive undertaking. The challenge of navigating the Bitcoin legal landscape is going to take a lot of hard work and cooperation. Please feel free to comment with your questions about regulation here in the US - we have a lot of experience in this space and want to share what we’ve learned.

Of course CV failed at reaching minds with what we thought was very important information. But failing is how we learn sometimes, and I'm grateful that there are those in the community who see that what we work on is valuable. Thank you.

How Many Eyes Are on the Books?

Echoing the sentiment of Ryan Straus (Ridell Williams); the overarching issue at the forefront of Bitcoinland is that Bitcoiners place a lot of trust in individuals and organizations. That’s not to say placing trust in people and institutions is always a bad thing, but that trust needs to come with safeguards. The recent events at Mt. Gox are an articulate illustration of those challenges. For years, Mt. Gox was a mainstay of Bitcoin. Gox allowed many people to get involved in digital currency with ease and relative security. We can thank Gox for much of the early adoption and infrastructure of the community. Ultimately the trust was betrayed. We saw technical glitches, a lack of communication, and wild levels of volatility.

Most of this could have been prevented with solid tech, transparency, and outreach. Still, I subscribe to the idea that Mt. Gox has given us a great gift. We can learn from their shortcomings and reference their successes for the next level of Bitcoin infrastructure.

Having developed software for a while, my greatest lessons draws from moments of failure. There have been amazing tools developed purely from breakdowns in software. These tools help us prevent, detect, resolve, and communicate about technical issues which naturally and inevitably evolve. I believe 2014 is a year where we can build some of those tools for Bitcoin.

The tools the community most needs to focus on are:

Triple-entry accounting: While this term is somewhat vague, I envision it as a method for reconciling a company’s books. In essence, you could assign a Bitcoin address as the holder of funds for the traditional double-entry accounting verticals. Operating expenses, accounts receivable, salary, investments, etc. could have dedicated Bitcoin addresses for the inflow and outflow of funds. This would make it much easier to visualize funds flow both internally and from the perspective of an outside auditor.

Ledger transparency: This piggybacks off of the idea of triple-entry accounting. I half-jokingly tweeted that managers of the future will be able to crowdsource peer-review of their records. For many organizations, like non-profits and publicly traded companies, stakeholders want transparency but the presentation methods are fairly analog. The idea is to digitize all of an organization’s fund flows, and make it available on something like the blockchain - so that people who know the correspondent Bitcoin addresses could verify that financial statements are accurate.

The implications of this are far-reaching, and an understanding of how it would play out practically are to be determined. Many people would prefer to invest or donate to an organization where the financial representations were accurate. The existence of ledger transparency is inevitable simply due to the competitive advantage. The upside for the organization is increased efficiency and reduced cost for auditing, as well as a lower risk of financial inaccuracy. People want to know “How many eyes are on the books?” The answer could soon be “Everyone’s.”

Full-Reserve Bitcoin Banking: We have the technology to prevent fractional reserve of our assets. This is the cutting edge of Bitcoin security. It’s shiny, it works, and not enough people / organizations are using it. Existence and placement of assets can be cryptographically proven and movement can be restricted with extremely granular configurations (multi-sig.)

Insurance: When all else fails, there is insurance. A Bitcoin depository institution could have an extremely secure system of storage. Risk could then be calculated and deposits insured.

Modularization: In the financial industry, there is a great deal of modularization. It is imprudent to have a single entity act as a depository institution, clearinghouse, order-matching exchange, and auditor all at once. These tasks can be separated for increased efficiency, reduced risk, and greater scope-precision. This is important for three reasons:

  1. It is easier for business operators to build smaller-scope products.
  2. When one of those competing products fails, the entire system doesn’t halt - it is swiftly replaced.
  3. Maintenance of a module does not require system-wide downtime.

Granted, the financial community has had several hundred years to evolve to the point of efficient compartmentalization. Fortunately for Bitcoin, most of the work has been done and we simply have to parallel many of the models that exist. We can even step it up a notch with transparency and decentralization of trust.

It is important that we remember the spectrum of what we like in principle and what is possible today, this week, this year, etc. It is going to take some time to revolutionize finance with the power of cryptography. We are still waiting for sweeping changes to happen overnight. It’s been 5 years, and we’ve resigned to working on what is practically achievable in experience-based timeframes. The items discussed above are our goals for 2014. Our focus is on the option of transparency, importance of choice, and the obsoletion of coercive trust.

(1) “If I own several pounds of gold, I may not want to keep all of it in my home.” (2) CoinApex.com has taken initiative to implement TE accounting for one of their companies as a proof of concept. Research is ongoing and results will be shared by year-end.

Syndicated from http://hub.playerauctions.com/alex_waters-bitcoin-eyes-on-the-books - on March 7th, 2014

Bitcoin is just the beginning

4:50am Saturday June 7th 2014

It’s been about 5 years since I first heard about Bitcoin. I was recently asked how I fell into Bitcoin, and I thought for a moment - can I remember?

It was vivid. I read the white paper, sat for a few moments and read it again. After finishing the second time, I paused. Because I had realized the simplicity and sheer power of a new concept. A concept where I was surprised for humans having not invented it earlier.

Here is - in my opinion - the entire premise of Bitcoin:

  • Pretend a town has one cart that people borrow to move things.
  • There is a piece of paper in the middle of town where the last person to have the cart has to write down who they give it to.
  • The piece of paper serves as a record of who possessed the cart at a given point of time, who they received it from, and who they gave it to. It also shows the creator of the cart, and the last person to hold it.

This allows the town to keep track of the cart, so that if it goes missing, or a piece is broken, there is a record of who is responsible.

With Bitcoin, we can facilitate this piece of paper on the internet. Except that the town is the world, the cart is a representation of all things which have value, and the person is everyone who wants to participate (including, maybe, the robots.)

We have explored the power of this concept over the past 5 years, and it has led to an 8.5 billion dollar ecosystem.

Whoa
Whoa

What’s remarkable is that the ‘Bitcoin’ people are familiar with (the one we hear about on the news) is just the first experiment. It’s the first interesting thing we tried doing with the above simple but powerful concept.

There’s a great deal more to come... instead of the cart representing cash, it could represents votes. It could represent identity, data, friendship, cars, pickles, vaccines, ideas…

At any time anyone with internet access could see how their government was spending taxes. They could see this without giving away their personal privacy. People could vote and it would matter. They can vote to require governments and corporations to reveal themselves perhaps without individuals needing to do so. They will enforce those votes because the natural course of this new system is to give control back to distributed consensus.

Digital currency allows me to purchase yogurt from an autonomous yogurt shop. The yogurt shop has no one owning it, it is a piece of code. It can buy supplies, repairs, ingredients, and pay its taxes without human involvement. It can buy additional property and replicate itself if it is profitable.

What if this future is inevitable and it is our generation's job to reduce the amount of time it takes to reach fruition.

The decentralized public ledger solves one of the ancient problems. The problem of how a community organizes itself past a size of ~150 individuals.  Keep an open mind, we may have just solved it. And don’t worry, it’s not some orwellian or huxley future. It’s not terminator 2 with us vs. the robots. It’s a force which decimates centralization through competitive advantage and redistributes value to the masses. It’s math, it’s beautiful, and I’m up until 5am writing about it.

Check out getkelvin.com
My Twitter: https://twitter.com/watersNYC
Ethereum: https://www.ethereum.org
Bitcoin Reddit: http://www.reddit.com/r/Bitcoin

Cheers!

Getting back into code

It's surprising how quickly I forget how to move around in code. It is nothing like riding a bike (which I also don't do as much as I should.) After spending a few months away from PHP - I suddenly have two projects where I am working exclusively in it. There's something magical about sitting in some new code, solving problems and listening to good music.

I have a lot of catching up to do. I learned about latent static bindings a year or so ago but I totally forgot how to use them. I literally have an empty database_object include in all of my projects. #wishfulthinking

Not to mention, 5.4 being released and I haven't even checked out the changelog.

Another tidbit of "entrepreneurial freedom" aka I don't have a corporate job right now:

I  have been catching up on the free crypto class I missed earlier this year. Dan Boneh has put together an excellent course on cryptography - you can find it either on Youtube or at the Coursera site (requiring a free sign-up). Some of the topics and explanations are math-intensive. Although, even the novice mathematician can follow the over-arching theories and bird's eye explanations.

One advantage to taking the Coursera class (as opposed to YouTube) is that it pauses for the Q/A section of every lesson. It's such a good feeling to get correct answers on such a complex topic - especially when you haven't touched discrete probability in over 5 years.

I can't take credit for getting the correct answers though. Prof. Boneh does such a good job of explaining the material. It's easy enough to get a few answers right. A lot of the notation escapes me, but Prof. Boneh waters some of that down to plain text.

If you're mildly interested in cryptography but don't need a Stanford-level education in it, at least check out this one video on crypto history:

If anyone is interested in taking the course and wants to discuss some of the topics - please let me know. The YouTube comment section is surprisingly vacant.

Edit: I forgot to mention that (redacted) is in the process of becoming an LLC (finally) and I can officially call it (redacted). This is a very exciting milestone for me - but is probably meaningless to all other humans.