The blockchain is often cited, mistakenly, as a panacea for many ills facing society. This confusion is understandable, stemming as it does from the extraordinary growth experienced in the crypto-asset industry, which seems to morph and change direction as fast as people can study its effects.Read More
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.
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.
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.
This is an exciting moment in human history. The Internet has provided humankind the ability to communicate over great distances and access to information and collaboration that’s unprecedented. The result is a great push in the advancement of our species. As a part of this technological wave of improvement, I have taken a moment to reflect on what that means now and for our future and how we can each contribute to the advancement of our civilization. The Internet is really, really cool. Anyone in the world can communicate with anyone else in the world in a split second, as long as they’re connected to the Internet. This is a huge deal.
I rank the Internet as the third greatest technological achievement in human history (behind only fire and electricity). It provides us a global communication system that accelerates advancements in every other field of human study: Medicine, mathematics, physics, law...you name it. With the Internet, we can perhaps achieve more in the coming 50 years than mankind has accomplished in the past one thousand.
With the Internet, Socrates’ famous words have never rung truer: “I am not an Athenian or a Greek, but a citizen of the world.” We are no longer a tribal species; we are a global species. Today, we can easily send information, currency, physical goods, and communications around the world in trivial amounts of time. If we follow the natural path that these advancements present, we can truly achieve a global culture, global governance, and hopefully global peace.
It is easy to see that education has the power to change some of the bad stuff in the world. Technologies and infrastructure like those offered by Wikipedia, Google, Twitter, Facebook, Amazon, Reddit, PayPal, and Bitcoin are enabling communication and the sharing of knowledge and information which is progressing us towards a global civilization. Anyone with access to the Internet can connect to sites like Carnegie Mellon, Stanford University, or the Khan Academy to take high-quality courses for free. They can then share what they’ve learned with people around the world on sites like Reddit, Tumblr, Stack Exchange, and Wordpress. This type of access to information and interaction is unprecedented. People from all walks of life and cultures are collaborating - thinking, learning and problem-solving together. I love it. This system, with all its benefits, is empowering individuals, but it also feeds “Big Brother.”
The concept of a global government is frightening. George Orwell opened many people’s eyes to the idea that one-way transparency is a bad thing. We are seeing real manifestations of his fictional “1984” in the news lately. Governments are definitely spying on their citizens. In the US, every word written and spoken has a good shot at being recorded and stored somewhere in Utah. Even still, I'm willing to wager that technology and freedom of information will overcome the rise of tyranny.
There are many who say “if I’m not doing anything wrong, what do I care if they watch me.” The problem is that you may think you’re not doing anything wrong, but the government may think otherwise. Many countries censor the politically outspoken, even torturing and killing those who do not support the party in power. The constitution and the bill of rights in the US argue for the freedom of speech, due process, checks and balances, and the right to not self-incriminate - but it is becoming clear that the US no-longer plays by its own rules.
The potential for corruption and using new technologies to go after law-abiding citizens is eye-opening. Fortunately, the transparency cuts both ways - leaking information and whistleblowing are easier than ever.
We are on the precipice of a global renaissance, and very few of us even realize it. The idea of contributing a single line of code, or a single blog post that brings us closer to capturing a type I civilization motivates me to write that code. It is why I am so passionate about technology.
As we’re in the midst of these exciting times, ask yourself this: how would you react if electricity was just invented? Would you behave like the majority of people who scoffed at it as a parlor trick?
There’s a good story about a man who thought that electricity could change the world. His own father thought that he was a fool. Now, JP Morgan stands as one of the most respected and visionary business men of all time. If only we could all reflect on this moment in history, it might teach us to respect each innovation for having the potential to change the world.
When a decentralized communication system (the internet), a decentralized currency (Bitcoin), and a decentralized voting system (TBD) come knocking at the door - will you jump on board?