What the ForkGov! Does staying together tear you apart even more?

Fork-governance of cryptocurrencies and decentralised networks examined

[Note: This text written in January 2019 follows on from “Towards an Analytical Discipline of Forkonomy” and “Forkonomy Revisited” and was first included in the Decentralised Thriving Anthology]


First, some definitions.

Forks:

In open source software, project codebase forks are commonplace and occur when existing software development paths diverge, creating separate and distinct pieces of software. Torvalds’ original Linux kernel from 1991 has been forked into countless descendant projects. In the case of blockchain-based cryptocurrency networks implementing ledgers, there exists the prospect of both codebase and ledger forks. A cryptocurrency codebaseforkcreates an independent project to be launched with a new genesis block which may share consensus rules but with an entirely different transaction history than its progenitor — e.g. BTC and LTC. A ledger fork creates a separate incompatible network, sharing its history with the progenitor network until the divergent event, commonly referred to as a chain split — e.g. BTC and BCH.

Consensus rule changes or alteration of the network transaction history may be the cause of such a fracture, deliberate or unplanned. Often when networks upgrade software, consensus rules or implement new features a portion of the network participants may be left behind on a vestigial timeline that lacks developer, community, wallet or exchange support. In the summer of 2018 a fifth of nodes running Bitcoin Cash (BCH) — a minority ledger fork of BTC with significantly relaxed block size limitations — were separated from the BCH network and a non-trivial number of would-be nodes remained disconnected from the BCH network weeks later.

Governance: Decision making process between multiple parties.

Blockchain governance: Decision-making process by mutually distrusting entities in a multi-party distributed system.

On/off-chain governance (aka governance by / of the network): Decisions are made either explicitly through the network’s ledger and UTXOs/balances possessed therein, or via some other (in)formal mechanism such as rough or social consensus.

Read these articles collated by CleanApp for a detailed discussion of key considerations in formally governed blockchain networks.

Immutability: An attribute primarily observed at the protocol layer in the decentralised networking stack — upon which the monetary layer depends for persistence — ensuring the inability of stakeholders or adversaries to alter the transaction record and thereby balances. With this in mind, the oft-quoted concept of ‘code is law’ which refers to immutability in cryptocurrency networks, typically referring more to preserving the intended use and function of a system and its ledger rather than a blind adherence to a software implementation regardless of flaws or vulnerabilities.

By Kevin Durkin for In The Mesh. Source: https://inthemesh.com/archive/reaching-everyone-pt-ii/

What Maketh a Fork?

The distinction between what constitutes a vestigial network and a viable breakaway faction is unclear and difficult to objectively parameterise. There is a significant element of adversarial strategy, political gamesmanship and public signalling of (real or synthetic) intent and support via social media platforms. The notions of critical mass and stakeholder buy-in are ostensibly at play since ecosystem fragmentations would be characterised as strongly negative sum through the invocation of Metcalfe’s Law as regards network effects and hence value proposition. Any blockchain secured thermodynamically by Proof-of-Work (PoW) is susceptible to attack vectors such as so-called 51 % or majority attacks, leading to re-orgs (chain re-organisations) as multiple candidates satisfying chain selection rules emerge. These can result in the potential for double-spending the same funds more than once against entities such as exchanges who do not require sufficient confirmations for transaction finality to be reliable in an adversarial context. Should a network fragment into multiple disconnected populations, adversaries with control of much less significant computational resource would be in reach of majority hashrate either using permanent or rented computation from sources such as Nicehash or Amazon EC3.

A striking example of this was the divergence of the Ethereum developer and leadership cadre (ETH) from the canonical account-oriented Ethereum blockchain (ETC) due to the exploitation of a flawed smart contract project resembling a quasi-securitised decentralised investment fund known as The DAO (Decentralised Autonomous Organisation). In this case the Ethereum insiders decided to sacrifice immutability and by extension censorship-resistance in order to conduct an effective bailout of DAO participants which came to exercise Too-Big-To-Fail influence over the overall Ethereum network, insider asset holdings, token supply and mindshare. A social media consultation process in conjunction with on-chain voting was employed to arrive at this conclusion though both methods are known to be flawed and gameable. During the irregular state transition process akin to a rollback, a co-ordinated effort between miners, exchanges and developers took place on private channels, exposing the degree of centralisation inherent in the power structures of constituent network participants.

The key event which transformed the canonical Ethereum blockchain (where the DAO attacker kept their spoils) from a vestigial wiped out chain to a viable if contentious minority fork was the decision by Bitsquare and Poloniex exchanges to list the attacker’s timeline as Ethereum Classic (ETC) alongside high-profile mining participants such as Chandler Guo, well resourced financial organisations such as Grayscale Invest (a subsidiary of Digital Currency Group) and former development team members such as Charles Hoskinson to publically declare and deploy support, developers and significant hashrate to defend the original Ethereum network. ETC now exists as an independent and sovereign network with diverging priorities, characteristics and goals to the larger Ethereum network ETH.


Forks and network governance: the case of Bitcoin and SegWit (excerpt from Forkonomy paper)

For a range of reasons, there is often strident resistance to hard forks — irreversible protocol upgrades or relaxing of the existing consensus ruleset — in “ungoverned” trust-minimised cryptocurrency networks such as BTC. The lack of controlling entities may lead to a chain split and lasting network partition if the delicate balance of stakeholder incentives fails in the presence of a divergent event. The implementation of SegWit (Segregated Witness) by the BTC network was eventually achieved in 2017 as a backward-compatible soft fork following several years of intense political and strategic maneuvering by the constituent stakeholders in the BTC network. This off-chain governance process of emergent consensus requiring supermajority or unanimity measured by miner signalling has proven to be an inefficient and gameable mechanism for administering the BTC network. Certain stakeholder constituencies such as the developers maintaining the reference Bitcoin Core software client implementation of BTC could not easily reach agreement with mining oligopolists and so-called big block advocates over the optimum technological trajectory for the BTC network.

Major stakeholders of the mining constituency strongly opposed SegWit as it would render a previously clandestine proprietary efficiency advantage known as covert ASICBoost ineffective on the canonical BTC chain. A grassroots BTC community movement campaigning for a User Activated Soft Fork (UASF) for SegWit implementation and a face-saving Bitcoin Improvement Proposal (BIP91) facilitated the eventual lock-in of the SegWit upgrade in the summer of 2017. A contentious network partition took place in August 2017, giving rise to the Bitcoin Cash (BCH) network which rejected SegWit and opted instead for linear on-chain scaling. By changing the block size and loosening the consensus ruleset without overwhelming agreement from all constituencies of the BTC network, it is difficult to find a basis for BCH proponents’ claims to be the canonical Bitcoin blockchain without invoking appeals to emotion, authority or other logical fallacies. The continuing presence of Craig S. Wright and his claims to be a progenitor of Bitcoin are an example of these attempts at legitimacy.


What the #forkgov? Fork-resistance and governance

Given the significant downside potential of real and perceived threats to the resilience and legitimacy of a fragmenting network and loss of associated network effects, the ability of a blockchain-based protocol network to demonstrate fork resistance provides significant strength to its value proposition and two notable examples of networks attempting to utilise such a mechanism are Tezos and Decred. Decred is an example of a hybrid PoW/PoS monetary network which is implementing a proposal and governance mechanism termed Politeia. Since coin-holders have voting rights based on stake weight, they have the ability to keep miners and developer constituencies honest through the mechanism to reach decisions by majority stakeholder consensus on matters including hard forks. These lessons were ostensibly learned through the developer team’s experiences in writing a BTC client which they felt was not appraised objectively by the Bitcoin Core developer ecosystem. Decred’s fork resistance is effectively achieved by the fact that most stakeholders would be non-voting on a minority chain, it would remain stalled as blocks would not be created or propagated across the upstart network.

Taking a high-level perspective, let’s address the most general question: are these two notions meaningfully compatible? If we think of any natural process in the Universe — from the celestial to the tribal — as accretions and communities grow in size and complexity, scalability challenges increase markedly. Minimising accidental chain splits during protocol upgrades is a worthy goal. However, denying a mechanism to allow factions a graceful and orderly exit has upsides in preserving the moat of network effect but at the cost of internal dissonance, which may grow over time and lead to second-order shenanigans. Sound familiar?

One can look at ledger forks in a few different ways as good, bad or neutral:

[Good] A/B/…/Z testing of different technical, economic or philosophical approaches aka “Let the market decide, fork freedom baby!”

[Bad] Deleterious to network effects of nascent currency protocols with respect to Metcalfe or (IMO much more relevant) transactome-informed network capital theory as discussed by Gogerty.

[Neutral] An inevitability of entropy and/or finite social scalability as these networks grow and mature it is not realistic to keep all stakeholders sufficiently aligned for optimal network health.


As such, protocol layer fork resistance and effective public fora with voting mechanisms can certainly be helpful tools, but there is a question as to whether democracy (the tyranny of the majority) should be exercised in all cases. If there was a “block size” style civil war in Tezos or Decred with no acceptable compromise in sight, would the status quo still be the best situation in all cases?

My perspective is that fork-resistance will largely redistribute the manifestations of discontent rather than provide a lasting cure to ills, and the native network governance mechanisms may be gamed by either incumbents or ousters. More time is needed to see how decision-making regarding technical evolution unfolds in both networks. Decred seems to be sitting pretty with a fairly attack-resilient hybrid PoW/PoS system, but there are some “exclusionary forces” in the network leading to the escalating DCR-denominated costs of staking tickets necessary to receive PoS rewards and participate in proposal voting, denying access to the mechanism to smaller holders.

Demand for tickets and staking rewards naturally increases with ongoing issuance, as the widening pool of coin holders wanting to mitigate dilution also does. As the ticket price is dynamic and demand-responsive, it creates upwards pressure which would make tickets inaccessible for a growing proportion of coin holders. At time of writing, “ticket splitting” allowing smaller holders to engage in PoS is available from some stake pools and self-organised collectives but the process is not yet automated in reference clients. On the other hand, the ongoing bear market has seen the USD ticket price fall from ~$8–10k USD at January and May 2018 peaks to ~$2k USD today in late January 2019 so those entering Decred with capital from outside the cryptocurrency domain would likely be undeterred. Data from dcrdata.org and coincap.io.

50 day moving average of DCR staking ticket prices. Source: https://explorer.dcrdata.org/charts#ticket-price

Further, as per Parallel Industries’ TokenSpace taxonomy research, staking rewards resemble dividends and token-based governance privileges resemble shareholder rights which make Decred appear a little closer to the traditional definition of a capital asset than pure PoW systems. This may or may not be an issue depending how regulation unfolds. Tezos has those potential issues plus the regulatory risk from the token sale. Decred’s airdrop may not have distributed the coin as fairly as possible but will undoubtedly attract a lower compliance burden than a token sale or premine.


“Activist Forks” & “Unfounder Forks”

Can you appreciate the technology utility but dislike the economic, human and compliance issues packaged together with a project?

Taking this a step further, these dissonant groups may conduct a guerilla campaign inside a network to focus attention on their cause. Last summer, a few anti-KYC factions of Tezos had appeared on social media outlets prior to network launch, however since the mainnet launch things have quietened down somewhat. One faction which still apparently intends to create a fork of Tezos changed tact and became a delegated staker within the network whilst continuing to voice dissent — perhaps this “fork activism” can be interpreted as a response to the “fork-resistance” of Tezos.

So, what else could a fork activist do? Take a look around at the ongoing ICO bonfire of the vanities which is largely due to poorly thought out sales of high-friction futility tokens infringing upon / attempting to circumvent various regulations around the world. The prospect of removing the token issuers and the tokens themselves once treasuries are liquidated (by themselves, or by lawmakers) and development ceases is quite attractive indeed — will we see a wave of “unfounder forks” as in this example? Perhaps operating in reverse to Simon de la Rouviere’s “Tokenised Forking” where both tokens and founders are excised.

Reaching Everyone, Pt III: Why Bitcoin Matters — Privacy, Freedom and Authority

ICYMI on In The Mesh, read the next parts there first.

This article is the third in a four-part series by Matt ฿ (@MattoshiN) and Wassim Alsindi (@parallelind) on the use of Bitcoin and the technology stack built atop it to assist those living under oppressive regimes or in conflict zones, and those seeking to flee them. Read the first and second instalments.

By Kevin Durkin for In The Mesh

Bitcoin is, above all, agnostic. It serves anything, and anyone, with no regard for who users are or what their intents might be, provided they play by the rules — rules, not rulers. What one may see in the network, protocol and currency is a context-dependent Rorschach test: one person’s rat poison is another’s meal ticket. While legacy financial institutions are fuelling a wave of social media deplatformings through the ever-expanding Operation Chokepoint, Bitcoin rises to prominence as a tool for the marginalised, ostracised, oppressed and forgotten. It enables any human to develop a parallel means to transact and store wealth and, as time goes on, the ways and means of using Bitcoin grow in variety and quality. There is no doubt that volatility in BTC-fiat crossrates make external measures of cryptocurrency value vary wildly, and obviously downside risk is not helpful especially when you are putting your life on the line. On the other hand, when national currencies undergo hyperinflationary events Bitcoin can be one of few accessible havens of relative stability. As of today, stablecoins are not the answer.

Freedom means everyone can use it, regardless of your opinion on their motivations, political leanings or priorities. Guerrilla and outsider organisations of all flavours and persuasions will be early adopters of decentralised technologies, and there’s nothing that can be done about that. The precautionary principle doesn’t work in permissionless environs and there is no ‘off switch’ — a feature, not a bug.

Bitcoin heralds a new age of ‘extreme ownership’ — or at least, provides the option for individuals to truly exercise sovereignty over their wealth. When used correctly, it is both unseizable and uncensorable. In the digital age, few things are more important than ensuring that wealth can be stored and transmitted without custodians or other third parties keeping personally identifiable information, blacklisting recipients or otherwise denying/reversing transactions. While physical cash offers individuals a degree of anonymity in their day-to-day exchanges, the push towards digital payments threatens this privacy by creating digital footprints that could be exploited for the purposes of surveillance.

How an individual ‘experiences’ Bitcoin is entirely up to them. On one end of the spectrum are those who have no need for true possession — consider speculators that rely on custodial exchanges or wallets. On the other are power users seeking granular control for maximising their privacy and financial self-sovereignty — functions like coin control, UTXO mixing or operating a fully validating node. Evidently, the further towards this end of the spectrum they tend, the more the value proposition of Bitcoin becomes apparent.

The appeal of Bitcoin today is undoubtedly rooted in the ease of its trust-minimised, rapid and global transfer, paired with the change-resistance and (algorithmically enforced) scarcity that precious metals have historically exhibited. Where faith in centrally-issued fiat currencies requires that participants entrust governments with maintaining monetary legitimacy and purchasing power, faith in a cryptocurrency network’s continued healthy function merely requires that participants act in their own self-interest — consensus is driven by active nodes. Indeed, you’ll have a hard time garnering support for an upgrade that would endanger the wealth of others such as inflating the money supply or sacrificing security for convenience. However, no system is infallible, and it’s foolhardy to overlook some potentially dangerous attack vectors executable in various manners. Everything from eclipse attacks — which geographically or otherwise target individual or grouped subsets of nodes so as to obscure and alter their view of the canonical blockchain — to state-sponsored 51% attacks and mass deanonymisation efforts which could vastly undermine the security and credibility of the network.

Fungibility and privacy are linked concepts — an asset’s fungibility preserves the privacy of the individual holding it. Assets such as gold and fiat cash are considered highly fungible, as it’s near impossible to distinguish between units of the same type. Conversely, something like a rare painting would be non-fungible, on account of its uniqueness. Functionally — for the most part — Bitcoin appears to be fungible: the vast majority of merchants will indiscriminately accept payments regardless of the provenance of coins.

Upon closer examination however, the situation is less rosy. As the protocol relies on a public ledger to keep track of the movement of funds, this provides a rich source of information for the intrepid data miner looking to perform analyses and potentially deanonymise users. “Blockchain analytics” companies (and their governmental clientele) have been known to track the propagation of UTXOs through the network that have passed through a given address or that have interacted with ‘blacklisted’ entities.

[Source: https://twitter.com/tillneu/status/1095996386238218242/photo/1; re-design by Kevin Durkin for In The Mesh]

There’s an entire class of coins which offer varying degrees of privacy within their protocols and address a niche that Bitcoin inherently lacks. In life-and-death situations, linking a BTC transaction or an address to a real world identity can have grave consequences in locations where authorities are hostile. On the other hand, if Bitcoin was as private as Monero or Zcash, then its monetary soundness would be dependent on cryptographic assumptions holding true. An example of such a situation is the recently disclosed vulnerability in Zcash which arose from cryptographic errors which — although complex to exploit — would have allowed an adversary to surreptitiously inflate the supply in the secret “shielded pool”.

Despite the transparent nature of Bitcoin’s ledger, it can be used privately. Whilst the protocol doesn’t incorporate strong guarantees itself at present, this is set to change with the implementation of improvements such as Confidential Transactions, MAST, Taproot and Schnorr signatures. Externally coordinated obfuscation techniques are in use today, most commonly CoinJoin implementations such as JoinMarket and ZeroLink. These allow users to pool and jointly transact multiple inputs so that a degree of plausible deniability is assured, as observers cannot map outputs to specific inputs.

Recent development of more sophisticated CoinJoin transaction types such as Pay-to-Endpoint (also known as PayJoin/Stowaway) and Ricochet, have proven the shortcomings of chain analytics capabilities as they are understood today. One cautionary note is that although we have many separate techniques for improving Bitcoin transaction privacy, interactions between these elements are not necessarily widely understood. As a result, there are non-zero probabilities of critical information leakage or failure of certain processes and users should not assume that all tools have been tested thoroughly in combination. For example sending mixed UTXOs from a CoinJoin wallet into a Lightning node may lead to deanonymisation given that Lightning node IDs are public.

Since the Bitcoin protocol has displayed such admirable resilience and uptime in the past 10 years, authorities at the local, regional, national or global scales can only try to apply pressure to the “soft” interfaces between the network and the wider world such as exchanges, merchants, miners, hardware and software vendors. Inconsistent laws arising from governments’ knee-jerk reactions towards Bitcoin are an ongoing reality.

Ensuring regulators are in possession of independent tools and information sources will minimise misunderstandings leading to arbitrary bans, restrictions, licenses, fines, jail or seizure. Even upstream infrastructure such as ISPs, domain registrars and payment intermediaries are coming under increasing pressure. One aspect of particular concern is the conflation of Bitcoin with tokens, ICOs or other blockchain projects raising funds via regulatory arbitrage. China now apparently requires the registration of cryptocurrency nodes with authorities. Where persons or businesses operating cryptocurrency enterprises are kept under close watch by corrupt officials, they are at risk of extortion or kidnap.

Another front on which there is work to be done is on the fungibility of bitcoin UTXOs themselves. As mentioned above, there is a growing industrial niche providing analytical services to governments and businesses submitting to state compliance procedures. Though they may oversell their capabilities to clients, it is known that exchanges supply information to them. One attempt to deanonymise identifiers on a network such as Bitcoin has involved attempting to use metadata such as browser fingerprinting, language preferences, node and web client IP addresses for location and to link these to particular addresses or UTXOs. Even a small part of the user graph being deanonymised has wider potential implications, due to the public nature of the ledger as discussed above. Know-Your-Customer and Anti-Money Laundering laws (KYC/AML) collectively constitute the greatest privacy risk to individuals using Bitcoin today.

Dusting is also a potential chain analysis technique which takes advantage of poor coin selection in wallets by sending tainted UTXOs to target addresses and tracking their propagation. This vector primarily targets merchants (exchanges and other economic nodes) as individual users can easily circumvent such attacks by marking dust UXTOs as unspendable. The mechanism of transaction itself is also important to recognise in light of the recent OFAC sanction of addresses linked to Iranian nationals. How is any entity going to stop people interacting with sanctioned addresses in a push system?

For the most part, many of the existing issues will become less of an issue over time as the Bitcoin network and the ecosystems built around it mature. The reduction of hashpower aggregation in certain regions such as the West of China makes it increasingly difficult for a malicious (private or state-sanctioned) actor to commandeer dangerous amounts, more skin in the game from cryptocurrency businesses contributing to a state’s GDP and tax coffers makes the budgetary penalty for nations greater should they consider outright bans on cryptocurrencies or adversarial mining and advances in cryptography hardens Bitcoin’s privacy preserving potential.

In the final part of this series the myriad tools, techniques and strategies to transact using Bitcoin in contexts where personal privacy and freedom are under threat will be explored.

Thanks to Yuval Kogman, Alex Gladstein, Richard Myers, Elaine Ou and Adam Gibson for helpful feedback.


Wassim Alsindi directs research at independent laboratory Parallel Industries, analysing cryptocurrency networks from data-driven and human perspectives. Find him at www.pllel.com and @parallelind on Twitter.

Matt B is a writer and content strategist in the cryptocurrency space with a particular interest in Bitcoin and privacy technology. He can be reached at itsmattbit.ch and @MattoshiN on Twitter.

Images by Kevin Durkin for In The Mesh

Ethereum Classic: The Ungoverned Blockchain?

How does anything get done if there are no leaders? Why hasn’t ETC died by being abandoned by the Ethereum Foundation after TheDAO hard fork? The ecosystem of participants and stakeholders working in and around the ETC network is examined in outline below.


So, where and how does ETC “governance” happen?

Making changes to Ethereum Classic consensus rules is “ungoverned” in a similar way to Bitcoin and Ethereum with little appetite for large numbers of consensus-breaking upgrades. Currently it is an ad hoc process where ECIP proposals are raised on Github, discussed in public/semi-public fora and should they be widely supported without contention locked-in to the nominally canonical “Classic-Geth” client with the other clients (Parity Labs’ eponymous software and IOHK’s Mantis) merging in response. In the case of a contentious proposed upgrade some arbitrary signalling criteria could potentially be set (i.e. % of miners upgrade/signal, on-chain carbon vote as used by ETH to justify DAO hard fork) though this has not occurred in ETC since the events which led to the creation of the network.

Source: https://medium.com/@TokenHash/the-star-improvement-proposal-standard-for-ethereum-classics-ecip-process-df20453de8e6
On-chain “Carbon Vote” for TheDAO fork on Ethereum. Source: https://elaineou.com/2016/07/18/stick-a-fork-in-ethereum/

As with other networks based on the original Ethereum design, some parameters such as adjustments to the gas limit per block — restricting the amount of EVM computation in a similar way to block size / weight in Bitcoin-derived networks — can be enacted in small increments on a per block basis via miner signalling. There is currently some discussion to motivate a decrease in the gas limit per block in order to avoid the chain growth rate issues which make running ETH full nodes a challenge in terms of burdensome resouce requirements. The likely aggregation of ETC hashrate among a small number of big mining farms, cooperatives and pools presents issues with reliance on miner signalling, as recently evidenced in Bitcoin when the merge-mined EVM Rootstock sidechains went live with 80% of network hashrate signalling. The naive downstream adoption of “default” Ethereum settings such as ETH’s 8 million gas limit per block is also a potential issue for ETC’s ungovernance to navigate.

ETC Gas Limit versus Block Height. Source: http://etcsummit.pllel.com

Two hard fork network upgrades have taken place in the ETC network — ECIP-1010 to remove the “difficulty bomb” and ECIP-1017 to institute a supply cap with asymptotic supply curve.

The decision-making process could be better organised, more transparent and clearly defined and refinements to the ECIP process are currently being discussed. At present most informal community discussion takes place on ETC’s Discord server, with ECIPs themselves posted on the nominated Github account (ethereumclassic) following a power struggle and takeover of the previous canonical Github account (ethereumproject), ostensibly related to the situation with ETCLabs discussed below. ETCLabs appear to be preparing to implement their own proposed parallel “ECLIP” improvement proposal scheme though this may be a mis-communication rather than a “consensus hostage situation” — situation is unclear at time of writing. Below are a few links to recent discussions and proposals relating to how Ethereum Classic reaches decisions relating to network upgrades and changes.

Ethereum Classic (ETC): Putting Together the New Decentralized ECIP Process

Ethereum Classic Improvement Proposals

ethereumclassic/ECIPs

Some stakeholders in ETC want to see closer collaboration with ETH, some are ambivalent and others are opposed. The recent announcement of Bob Summerwill as ETC Cooperative Executive Director is noteworthy as he was instrumental in founding the Enterprise ETH Alliance, was involved in the Ethereum Foundation, was a senior figure at Consensys. There are some existing collaborative projects between ETH and ETC, including Akomba Labs’ “Peace Bridge” to allow cross-chain transactions, Kotti unified PoA testnet and some recent discussions regarding ETC considering the adoption of aspects of the Ethereum 2.0 roadmap.

The last few months have seen a change in the composition of the ecosystem around Ethereum Classic, as a the previously pre-eminent privately funded core development team “ETCdev” collapsed due to lack of funds with another entity “ETCLabs” forming a new developer team “ETCLabs Core” with significant overlap of personnel. Some community members have described the sequence of events as a corporate takeover attempt, others do not seem so worried.

“The ETC community is still small and, in this bear market, lacks funding from volunteer investors or other sources to initiate new core maintenance and development projects or pay new core developers quickly. This is because there are no leaders, foundations, pre-mines, treasuries, protocol taxation or any other financing gimmicks that so much contaminate other centralized projects.”


ETC History and Network Characteristics

The Ethereum blockchain launched on 30th July 2015. When the Ethereum Foundation conducted a hard fork as part of TheDAO’s exploit recovery (“irregular state transition”) on July 20th 2016, they kept the name and ticker symbol Ethereum / ETH. The canonical chain branch in which TheDAO exploiter kept their spoils survived against most observers expectations and attracted community, developer, exchange and mining support. The unforked chain came to be known as Ethereum Classic (ETC).

Ethereum Classic (ETC) is pure Proof of Work utilising the Ethash (Dagger Hashimoto) algorithm. It is the second largest network using this algorithm, marshalling approximately 15–25x times less hashrate than Ethereum (ETH). Due to its situation as a minority PoW network without 51% attack mitigations at the protocol or node levels it has been deemed to be vulnerable to thermodynamic attacks and this has been observed recently. Mining is permissionless so the identities and extent of participation of block producers are not necessarily known. Some network and blockchain analysis of the ETC mining ecosystem is being undertaken currently. There is a high degree of suspicion that covert FPGA and/or ASIC mining was employed leading to the recent majority attacks. Most of the hashrate employed in the recent attacks is suspected to be of exogenous origin to the existing Ethash ecosystem and marketplaces such as Nicehash.

Ethereum’s whitepaper was first circulated in late 2013 and there was a “token crowdfunding” (= ICO) in 2014. Approx 72 million of the 105 million supply issued were distributed in the ICO. Mining providing block and uncle rewards has distributed the remainder. Work is ongoing currently to compare the movement of balances either side of the ETC/ETH fork. Inflation was set to “5M20”, reducing mining rewards by 20% every 5 million blocks which corresponds to approximately 5% annual supply increase. The same hard fork in 2017 (ECIP-1017) also installed a fixed supply cap.

Ethereum “became” Ethereum Classic because the Ethereum Foundation asserted intellectual property rights over the “Ethereum” name despite branching away from the canonical chain. This is still a point of contention and some prefer the name “ETC” as a subset of stakeholders look for alternative nomenclature to “Classic”.


How are Development and Ecosystem Activities Funded in ETC?

What is the reference node implementation?
This is also a bone of contention in ETC. When ETCdev ceased operation, the hitherto canonical client Classic-Geth written in Golang stopped being reliably maintained. ETCLabs Core maintains Multi-Geth but not all stakeholders in the ETC ecosystem are currently comfortable using their software given their ostensible desire to have an independent ECLIP improvement proposal pathway which appears more hard-fork than soft-fork oriented.

Are there any other full node implementations?
Parity Labs maintains their Parity client written in Rust.

IOHK maintains their Mantis client written in Scala.

How is client development funded?
Development is funded by private organisations — ETCLabs, Parity and IOHK fund client development following the demise of ETCdev. ETC Cooperative (partly funded by DCG/Grayscale and DFG) also support protocol development.

There has been resistance to adopt an on-chain treasury as proposed by IOHK, some stakeholders see this as inherently centralising but given the collapse of ETCdev due to funding shortfalls and absence of alternative funding models / “build it and they will come” the status quo is at risk of prolonging a continuing tragic commons scenario. There are some grants and funding opportunities via ETCLabs but at present are focused on business/startup incubation.

Most funds are controlled by companies but ETC Cooperative is now a 501(c)(3) non profit based in the USA. There is also a small community fund controlled by a multi-signature wallet but there are no current plans to disburse this.

What other software does the entity(ies) which funds the reference node produce?
Hard to answer conclusively since there is a lack of agreement over what the reference implementation currently is.

Parity — Rust ETH client, Polkadot/Substrate, Bitcoin client, Zcash client.

ETCdev — defunct, Emerald application development framework and tools, Orbita sidechains.

ETC Cooperative — developer tooling and infrastructure e.g. recent Google BigQuery integration.

IOHK — a lot of software for Cardano, ZenCash, ETC.

ETCLabs — ?

What else do the entities which develop or fund the reference node do? (not software)

Parity — Web3 Foundation

ETCLabs — VC/Startup incubator

ETC Coop — General PR, community and ecosystem development, conference organisation, enterprise & developer relations

IOHK — PR, summits, art projects (Symphony of Blockchains), academic collaborations, VC partnership and research fellowships with dLab / SoSV / Emurgo….

DCG/Grayscale/CoinDesk — PR, financial instruments e.g. ETC Trust, OTC trading…


How is work other than development (e.g. marketing) funded?
It in unclear how funding and support for non-development activities is apportioned.

DCG/Grayscale and DFG fund ETC Cooperative

DFG funds ETC Labs


Related projects — Are there any significant projects which are related? For example, is this a fork of another project? Have other projects forked this one?
Ethereum (ETH) was a ledger fork of this project, Callisto (CLO) was a ledger fork of this project. There may have been more minor codebase or ledger forks.


Significant Entities and Ecosystem Stakeholders

ETCLabs is a for-profit company with VC/Startup and core development activities funded by DFG, DCG, IOHK and Foxconn.

ETC Cooperative is a 501(c)(3) non profit based in the USA funded by DCG and DFG.

ETCdev (defunct)

IOHK (Input Output Hong Kong) is the company led by Charles Hoskinson who previously worked on BitShares, Ethereum and now Cardano.

DCG (Digital Currency Group) is Barry Silbert’s concern which contains in its orbit Grayscale Investments, CoinDesk, Genesis OTC Trading amongst other organisations.

DFG (Digital Finance Group) is Chinese diversified group concerned with investments in the blockchain and cryptocurrency industry, OTC Trading, Venture Funds.


Wassim Alsindi directs research at independent laboratory Parallel Industries, analysing cryptocurrency networks from data-driven and human perspectives. Find him at www.pllel.com and @parallelind on Twitter.

Reaching Everyone: Are stablecoins the answer to Bitcoin’s volatility?

It depends on the question. For those most in need of value preservation and freedom of transaction, the risks likely far outweigh the benefits.

This is a brief aside from our “Reaching Everyone” article series on In The Mesh, by Matt ฿ (@MattoshiN) and Wassim Alsindi (@parallelind) on the use of Bitcoin and the technology stack built atop it to assist those living under oppressive regimes or in conflict zones, and those seeking to flee them.

There is no doubt that volatility in BTC-fiat crossrates make external measures of cryptocurrency value vary wildly, and obviously downside risk is not helpful especially with those in straightened circumstances, or even with their lives on the line. On the other hand things like this might happen:

https://www.thesun.co.uk/news/7804100/isis-war-chest-bitcoin-crash-investment-millions-cryptocurrency/

Could so-called “stablecoins” be the answer to the volatility dilemma? Well, stable with respect to what, and how to maintain price consistency? Broadly, there are three current models:

1) Central issuing authority. Confidence in value is faith-based with censorship risk — such as JPM’s upcoming offering. Additional risks with undercollaterisation.

2) Asset-backed with trusted custodian. Price maintenance depends on faith in the underlying assets and transparency of auditing. Examples include Tether or gold-backed products.

3) Algorithmic mechanisms seem like worthy but very much unproven experiments. Until tested at scale and over significant periods of time, these are no place for people on the margins to place their wealth. DAI and Basis (RIP) are examples of this approach. Additional risks arise from regulatory burden, if the stability process is deemed to be security-like and centralised oracles reporting external prices. Front-running may be an additional issue with DAI as MKR (MakerDAO’s parent token) holders would be diluted in the event of a peg failure, with more sophisticated holders jumping ship at first signs of trouble. This may resemble the Cantillon Effect playing out backwards?

There is considerable base protocol and smart contract risk for platform-issued tokens such as stablecoins, especially as the current predominant stablecoin token “hosting” platform Ethereum prepares to undergo transition to ETH1.X and ETH2.0 with some combination of ProgPoW, hybrid PoW/PoS, PoS, the bewilderingly diverse Plasma family of state channels, new virtual machines, sharding and/or state rent. Contrast this with Bitcoin’s conservative development philosophy and aversion to rapid changes in network function largely pushing innovation into “second layers” such as Lightning Network and sidechains.

Using a Stablecoin today largely redistributes risk from price volatility to technological, regulatory and/or custodial uncertainty, not necessarily a wise trade for someone with few other options compared to physical cash. Privacy is also an issued with almost all these systems, which either require some element of AML/KYC or use networks with inherently poor privacy. Historically, no stablecoin has ever defended its peg over a period of years. Stablecoins are still an experiment, no place to deal with matters of life or death. As the crowded retinue of competing fiat-pegged products grows ever larger, more concepts from traditional finance such as demurrage, censorability, discounts on par or interest are being proposed or experimented with.

Even major currencies such as the British Pound have failed to maintain agreed trading ranges against well resourced adversaries, what chance a smart contract or non-native blockchain token with limited resources has to balance price, supply and demand through the various phases of cryptocurrency’s wild market cycles remains to be seen.

The BitShares USD stablecoin BitUSD has among the longest history of any attempt. Source https://coinmarketcap.com/currencies/bitusd/

For people outside the most developed nations, or those whose human rights are under risk stablecoins do not deliver the goods, at least in the present day.

Wassim Alsindi directs research at independent laboratory Parallel Industries, analysing cryptocurrency networks from data-driven and human perspectives. Find him at www.pllel.com and @parallelind on Twitter.

Matt B is a writer and content strategist in the cryptocurrency space with a particular interest in Bitcoin and privacy technology. He can be reached at itsmattbit.ch and @MattoshiN on Twitter.

A Brief Primer on Navigating TokenSpace

This is the second in a series of pieces focussing on TokenSpace, a novel conceptual classification framework for cryptographic assets. This Q&A provides some additional background. If you need more answers than these two pieces provide, get in touch to be a lucky proof-reader of the manuscript.

TokenSpace may be considered by analogy with our own spatio-temporal conception of reality, consisting of a three-dimensional space delineated (for convenience and visual clarity) by orthogonal axes Sbar, Mbar and Cbar. Assets may possess a score or range on each axis between 0 and 1 inclusive giving rise to an object inhabiting a region of TokenSpace described by the (x, y, z ) co-ordinates (C, M, S). Time-dependence of object properties may also be incorporated to reflect the dynamic nature of cryptocurrency protocol networks and their native assets, tokens issued atop them and network fragmentations such as ledger forks.

Sbar, Mbar and Cbar correspond to intuitively reasoned assignments of subjective classificatory meta-characteristics Securityness, Moneyness and Commodityness which together form the basis of TokenSpace classification
methods currently in development. Each asset’s location in TokenSpace is intended to be derived from a weighted scoring system based upon taxonomy, typology, intuitive, elicited and/or quantitative methods depending on the choices and assertions of the user — which may or may not be identical to those proposed in this work.

TokenSpace visual impression. Yes, those branches coming out of the axes represent taxonomies!

Definitions of the proposed meta-characteristics:
Sbar — Securityness. The extent to which an item or instrument qualifies as or exhibits characteristics of a securitised asset. For the purposes of clarity this meta-characteristic does not refer to how secure (robust/resistant) a particular network or asset is from adversarial or malicious actions.
Mbar — Moneyness. The extent to which an item or instrument qualifies as or exhibits characteristics of a monetary asset.
Cbar — Commodityness. The extent to which an item or instrument qualifies as or exhibits characteristics of a commoditised asset.

Example scores for a range of assets are outlined in the tables below with visual depiction in Figure 2. Ideal types are postulated canonical examples of particular asset types and are discussed in Section 2 of the manuscript. It is the aim of this and future research to provide suggestions for classification approaches and some examples on how TokenSpace may be utilised to comparatively characterise assets from the perspective of various ecosystem stakeholders. Time-dependence may also be significant in certain instances and can be incorporated into this framework by evaluating an asset’s location in TokenSpace at different points in time and charting asset trajectories.

TokenSpace is expected to be useful to regulators, investors, researchers, token engineers and exchange operators who may construct their own scoring systems based on these concepts. Careful review of territory-specific regulatory guidance and judicious consideration of boundary functions for example delineating “safe”, “marginal ” or “dangerous” likely compliance of assets with respect to particular regulatory regimes are recommended and an example is presented in Figure 3. Parallel Industries is developing hybrid multi-level hybrid categorical/numerical taxonomies for each meta-characteristic alongside time-dependent and probability distribution functions for anisotropic score modelling and is available to develop bespoke TokenSpaces for clients on consulting and contract research bases.

Example of cryptographic assets inhabiting TokenSpace
Example of a regulatory boundary function. Arbitrary polynomial for illustrative purposes.


Q&A on Reaching Everyone: the Political and Humanitarian Potential of Bitcoin

This conversation with In The Mesh was recently published on their website. Wassim Alsindi, director of research at Parallel Industries, is currently co-writing a series of articles In The Mesh in which he’s deep-diving into bitcoin and the potential for cryptocurrency to be leveraged to assist those living under authoritarian rule. If you’ve missed them, be sure to check out parts I and II and come back soon for the last two installments. Wassim’s take on everything “crypto” is incisive, studied, and worth listening to, and he has an interesting background, ranging from academe to experimental music. So we chatted with him to learn more about his background and get his perspective on some current trends in the cryptosphere.

Kevin Durkin for In The Mesh

When did you first hear about cryptocurrencies and what were your thoughts about it at that time?
My life before Bitcoin and cryptocurrencies was as an experimental musician and decentralised arts organisation founder, manager of interesting creative technology projects and festival curator. Whilst on a music tour around the US West Coast in 2012 we went to a friend-of-a-friend’s place in Silicon Valley, he opened his closet and said “check this out, I’m doing this thing called mining Bitcoin”. It took a while to be convinced, the idea sounded great but everything I could find online looked quite dubious — Mt. Gox, Bitcoinica, BitInstant and so on — and as I wasn’t a computer scientist or cryptographer the detailed discussions were beyond me. It wasn’t until 2014/5 during what may have been Bitcoin’s darkest days that I started to get really interested. The idea of natively digital money that isn’t controlled by anyone has obvious appeal, but surviving the Gox incident showed me that the technology had some serious resilience and could be a long-lived proposition.

Wassim Alsindi

Lately, Bitcoin and other coins have been losing financial value. How do you see this turn of events and the claims that cryptocurrency is and always was a “bubble”?
Well, the facts don’t lie, Bitcoin had a cycle bottom in 2015 at around $180 and two years later it was trading at a hundred times that price. As much as I favour Bitcoin’s characteristics and qualities as the first natively digital commodity and (in time) money, we do have to ask ourselves if that kind of price action is really sustainable or desirable. Volatility is acceptable in a commodity or speculative vehicle, but if people around the world are going to adopt it for monetary use we need to see some more price stability, increased liquidity and less friction in the conversion of our existing state monies to cryptocurrency. Was it a bubble? Probably. But not the first, and likely not the last either. So, are they bubbles or market cycles as a new asset is adopted, matures technically and becomes monetised? That is in the eye of the beholder.

Your interest in cryptocurrency seems to peak at times of others’ fear/panic. Why is that?

Wassim is in it for the tech.

It’s somewhat of a cliché these days but I’ve been a technology researcher my whole adult life, so I really am here for the tech and the freedom. My interest has been steadily building over the years and having wrapped up previous commitments I have nothing better to do now. I don’t take pleasure in the bear market, it’s been very difficult for me and for Parallel Industries too. We’re operating on a shoestring, and the string keeps getting shorter every time the market takes a leg down. I had hoped to bootstrap the organisation on an open-source donations model but this seems very difficult at the moment — even organisations and developers who directly contribute to these protocols are struggling. All the same, every day that Bitcoin survives in the wild it gets stronger and more widely known. These days you don’t have to ask most people in the developed world if they’ve heard of it, they just want explanations and/or advice.

You’ve innovated a field of fork future studies, called forkonomy. How do you hope it will impact the crypto space?

The research area arose from a conversation with a Twitter friend who was monitoring hashrate on various networks using the Equihash algorithm. We noticed that a new coin (BTCP) had a much higher “market capitalisation” but a fraction of the hashrate of the project it had been borne from (ZCL). Due to the novel “fork-merge” operation used to generate the new ledger, a coin with an effective age greater that Bitcoin’s was created.

So we have been afforded a glimpse into a possible future of Bitcoin, albeit a nightmare scenario where the network has not achieved its goal of developing a transaction fee market before the mining subsidy attenuates. The goal is to find similar anomalies as they arise and relate them to the possible futures of major networks. Having spent some time as an experimental astrophysicist, I like to compare this idea with the stellar taxonomy of the Hertzsprung-Russell diagram which predicts the likely fates of stars based on their temperature and luminosity.

Still some way to go before we have a suite of robust and predictive analytical tools, we are very much in the alchemical phase of cryptocurrency.

How has your background has made you sensitive to the potential uses of cryptocurrencies by people living under oppressive regimes?
Without going into too much detail, the “political and humanitarian hacking” potential of decentralised technologies in general and Bitcoin in particular are very real for Iraqi diaspora such as myself. For those who were able to leave the country under Saddam’s rule as some of my family did, one of the hardest things was to move money or value from place to place. Bank accounts had been frozen, confiscations of gold and cash were commonplace at airports, bandits would patrol the desert regions close to frontiers looking for easy pickings and scholars’ international funding was withdrawn suddenly. Given the above, it is not hard to see promise in these nascent technologies to re-empower the individual and community at the expense of tyrants, institutions and nation-states. The fact that we can engineer tools, solutions and strategies for people living under oppression or conflict to have government-hard, unconfiscatable pseudo-monetary assets completely changes things for people in the most unfortunate and compromised situations.

The “Byzantine Generals” in Wassim’s family.

What kinds of uses of cryptocurrency do you envision that can do the most for people in those situations?
I would say that only a handful of cryptocurrencies truly show the resilience (today or as future potential) to withstand these sorts of situations. These are the ones with sufficiently mature and dispersed networks that have a defined focus on immutability, privacy and censorship-resistance that also lack central points of failure such as conspicuous leaders, companies or foundations. Bitcoin, Monero and Ethereum Classic are the examples I have identified having deeply studied the cryptocurrency space for the past six and a half years. (Happy to hear of any more — please hit me up on Twitter, even if it is a smaller / newer network.) The uses are limited only by the ingenuity of the brilliant minds worldwide who do and will work on these issues, and that is what Reaching Everyone is really about — nothing more complicated than a non-profit, unorganised initiative to plant these seeds in curious minds: that we must not forget the rest of the planet as the fortunate ones create a new world of financial freedom. But we don’t have to get too hand-wringing about it — this is not about “Western guilt”. Incentives drive Bitcoin and everyone can act according to their own rational self-interests here. Furthermore, the less resources people have at hand, the more resourceful they tend to be. Anyone who has visited less wealthy countries can attest to this.

The experimental musician Goodiepal helped bring Wassim into his current exploration of the possibilities of cryptocurrency.

How did Reaching Everyone come to be?
The idea came about quite unexpectedly, despite all the above. Just over a year ago (December 2017) I was in London for a meeting with UK financial regulators as I have another project TokenSpace which has developed novel taxonomic frameworks to help see similarities and differences between cryptographic assets with the goal of preventing regulatory mis-steps. It just so happened that my much beloved Danish-Faroese friend and infamous radical experimental musician Goodiepal was performing with his band their annual Christmas show that evening. So I went along and found out that they had moved to Serbia and were raising funds for informal humanitarian work with refugees stuck in limbo there at the EU frontier. Among the biggest issues facing the people they had been helping were moving money internationally and exploitation / extortion by smugglers and mafia cartels. I simply put two and two together that cryptocurrency can provide at least a partial solution to these problems. I’m sorry that we haven’t been able to raise any money for the immediate cause but I hope we can still make a difference in the longer-term.

Your interests are wide-ranging and Parallel Industries seems to have a holistic view on the crypto world. What do you hope Parallel Industries will add most significantly in the near future to the crypto scene?
 Indeed things are moving forwards quickly on multiple fronts, and as well as pushing ahead as much as possible with Reaching Everyone, I am trying to take a wider view of what I consider the ontological meta-stack as applied to radically decentralised technologies. The “TokenSpace” supra-taxonomy research project is very close to outputting a manuscript after over a year of work and I recently revisited “Forkonomy” in early 2019 having learned some new skills at the command line for node operation, mining and directly harvesting blockchain data. There is another project entitled “DAOs and Don’ts” which investigates insider asymmetries in P2P networks, though it is a daunting prospect to comprehend the task at hand due to the sheer volume of cases encountered.