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:

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

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 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 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.

Q&A On TokenSpace: A New Conceptual Classification Framework For Cryptoassets

In search of fresh perspectives on the characteristics of cryptographic assets. This Q&A with Matt ฿ originally appeared in in December 2018. A comprehensive manuscript describing TokenSpace will be released soon, in the meantime more TokenSpace information over at and on Twitter.

Q: Can you give a bit of background on yourself? What got you interested in cryptocurrency?

Sure, it’s been a winding road though so let’s not get too lost in details! I grew up in various towns and cities in the UK mostly reading maths and sci-fi books, stargazing, misusing home chemistry crystal growing kits, making music and playing way too many computer games. Spent a decade at universities studying, researching and managing scientific research in chemistry, physics and astronomy where I really got exposed to the idea of organising knowledge to further our understanding. My chemistry mentor (now YouTube-famous) Professor Sir Martyn Poliakoff is very likely the world’s leading connoisseur of the periodic table of the elements so I’ve had classification systems such as taxonomies on the brain for a while now.

After that I spent several years working with experimental music and arts, running a record label, organising educational activities, managing interesting projects and curating a festival. 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 sketchy — Mt. Gox, Bitcoinica, BitInstant and all that — and 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. Since then it’s gradually taken over my life as I’ve worked my way through various activities as a hobbyist — watching the markets, running nodes and following on-chain activity, messing around with coloured coins and smart contracts, mining and now research of various flavours through an independent research organisation Parallel Industries.

My Bitcoin sunrise, after playing a gig in Stanislaus National Forest in Summer 2012

Q: ELI5 TokenSpace.

TokenSpace is an attempt to make a relatively simple and easy to use comparison system out of the sprawling and confusing mess of cryptocurrencies, tokens and suchlike that we find ourselves with today. Think of it as a 3D “space” to place different assets inside, with each of the axes representing a characteristic that we can use to visually compare and contrast different assets. The position of an asset along each axis is determined by a scoring system between 0 and 1 for that characteristic, so that a score of zero means the asset doesn’t have those properties at all, and a score of one means it’s a textbook case. Where the score comes from is up to the user, it can be from an intuitive ‘gut feel’ perspective, a weighted taxonomy of different properties, a consensus view from a panel of advisors and so on. It all depends on the intended application.

TokenSpace visual impression

The primary application so far has been to look at the ongoing uncertainty as to the legal and regulatory status of cryptoassets and how similar or different they are to traditional asset types such as monies, securities or commodities. Obviously there is a lot of variation from asset to asset and it is becoming increasingly clear that government bodies are looking at these things closely.

It’s important to understand that the difference between concepts like TokenSpace and the periodic table of chemical elements is that we are still very much in a subjective realm with cryptoassets, and therefore any particular score should be taken with a pinch of salt. People are not going to have the same opinions on a lot of these things — if you follow the cryptocurrency and blockchain space then you will know that humans are VERY biased creatures! A future avenue for this work is to explore different perspectives to see where they come together and where they do not. You could say we are still in the occultist and alchemical phase of cryptocurrency…

Q: Tell us about the metrics you’re using to place the assets in this 3D space.

The axes I’ve chosen are for the properties Securityness, Moneyness and Commodityness — in other words how much a coin or token embodies or exhibits the characteristics of a securitised asset, a money or a commodity. Having encountered the fruitless debate of “I think token X is a security but you think it is not” innumerable times, and given the fact that these tokens and networks are hybrids of payment mechanisms, rights to on-chain property or “cashflows” like masternodes, value stores and consumable resources it seems reasonable to engender a greater ability to differentiate between more subtle differences in these assets.

One thing that’s nice about working with a conceptual framework like this is that it could easily be adapted for another purpose — for example Parallel Industries has begun a collaboration with DAO specialists who want to apply a similar approach to characterising the organisational structures that exist around decentralised networks and providing the right dimensions are found, there’s no reason why you can’t also build a set of taxonomies or scoring systems for that purpose. It does require careful thought and design choices to ensure you end up with a useful tool that can be meaningfully used.

Q: How would you distinguish between, for instance, Bitcoin, Litecoin, Tether and Polymath with this framework?

Good question. I think it’s reasonable to say that as assets, bitcoin and litecoin are often thought of as having “commodity-like” characteristics. People often refer to the digital gold and silver memes so they would place reasonably well on that, though bitcoin has much more liquidity and market depth so it would be easy to make a case for it being the premier digital commodity. Neither have much in common with securities though you could make a case that Litecoin’s founder and Foundation are somewhat relied upon for expectation of profit. As much as it’d be nice to say otherwise, bitcoin and litecoin still aren’t great as monies compared to fiat currency so they do still have some ground to cover there.

Tether functions primarily as a monetary substitute although it’s hard to be confident about it’s supply or ability to store value in the long term, though by virtue of its stability against fiat currency relative to traditional cryptocurrencies it does fulfil that purpose reasonably well in today’s high friction on and off ramps with exchanges for example. It doesn’t look much like a commodity or a security to me.

Polymath is not one I’m very familiar with, being a security token platform they are at least being upfront with that. As an ERC20 token on Ethereum with a central administrative team it does seem to have a lot of the hallmarks of a security and though there does appear to be some “utility” being used to issue securities tokens on their platform it could be argued that it has more commodityness than the typical Ethereum ICO vintage of 2017 or something quite useless such as XRP but nowhere near as much as bitcoin or litecoin.

Placing selected assets in TokenSpace. Scores are assigned by author.

Q: You’ve taken on the seemingly insurmountable task of attempting to classify cryptoassets. What are regulators doing wrong? What sort of organisations would benefit from this?

It’s a tall order indeed, and perhaps not surprising that it’s taken a while to get to this stage. The hope is that tools like TokenSpace can help coin and token issuers, lawyers, regulators and exchange operators get a better grip on the characteristics of different assets and avoid making misinformed decisions such as blanket bans, listing or adopting assets which might cause them compliance headaches or issuing poorly designed tokens which might land them in hot water later.

I’ve met a few regulators, token issuers and exchange compliance officers and it seems that a lot of the pitfalls seen so far (and many more to come) are from a lack of understanding of how these assets and the underlying networks function and evolve over time. It’s virtually impossible to have a complete grasp on these things — even Satoshi didn’t have every angle covered! The biggest mistake I’ve seen being made so far by officials is the rush to make sweeping pronouncements without being able to back them up with justifications that make the situation even less clear.

One example are comments made by US Securities and Exchange Commission officials that the ETH crowdsale was a securities offering but the Ethereum network has since become “sufficiently decentralised” and therefore is no longer a security. Taking that at face value, it suggests that at one point, ETH has passed through a “legal / not legal” boundary, but where and how? What made the difference and how was that decision arrived at? Node distribution? Concentration of tokens amongst insiders? Decentralisation of leadership? It’s not easy to resolve that with existing securities laws guidelines like the Howey test. What about network forks and issues such as The DAO exploit? These sorts of things are going to keep happening.

Example of an Arbitrary Regulatory Boundary Function

Q: What could regulators be doing better?

Make clearer statements, do your homework to understand the technology at play and be more upfront about decision-making processes! What are the metrics that regulators deem important? Why? Don’t build rigid legal frameworks that can’t cope with the breakneck pace of cryptocurrency developments. There will always be regulatory arbitrage with borderless technologies, just look at Malta and Puerto Rico. Which small nation will be next to reposition itself to attract jurisdiction-hoppers like Binance?

There is also the perennial issue of legions of “Blockchain Experts” who usually land influential advisory roles but seem to know very little about the ins and outs of applied cryptographic networks and assets associated with them. Having spent a very frustrating year in a business school environment having to deal with fakers and imbeciles claiming said proficiencies recently, I can confirm that this is a very real problem.

Q: What else is Parallel Industries working on? What are your future plans?

Currently Parallel Industries is very much in the bootstrap phase, limping along with very little income (thanks bear market) so it’s a major priority to bring in resources through sponsorship, consulting and contract research to operate sustainably so that we can expand our research activities and yours truly isn’t spread quite so thinly! The TokenSpace paper is finally approaching readiness and our Forkonomy project undertaking comparative analysis of network forks (such as BTC/BCH, ETC/ETH, BTCP/ZCL) has already had a number of outputs including a talk at the recent ETC Summit in Korea and a well-received paper. There’s also a project in progress named DAOs and Don’ts looking at power imbalances in cryptocurrency networks which has been on the sidelines a little too long. Keep an eye out for an article series on political and humanitarian hacks and use cases for cryptocurrencies in In The Mesh magazine under the title Reaching Everyone.

If any of that arouses curiosity do a look at our website or find us on Twitter @parallelind. If you’re a crypto-millionaire looking for a way to lighten your bags and fund some research in the process, we can help with that too!

Forkonomy Revisited: Where Are They Now?

51% of a year has passed, let’s check back in on our plucky and hopeful minority networks.

[Note: This is a follow-up commentary after the original Forkonomy paper (now on Hacker Noon) was written and self-published on in summer 2018 with last revision 10th August. Figures come from #forkonomy tweets, original manuscript and presentation slides from ETC Summit Forkonomy talk in September 2018.]

Introduction: ELI5 Forkonomy

Forkonomy” was a shower thought and though the idea initially seems awkward and quirky, in retrospect it was simply the concrescence of my previous and current proclivities in the domains of time (small)time (large)lightspace (small)space (large) and cryptocurrency. Thinking about a proof-of-work cryptocurrency network as a thermodynamic system with its own internal synchronicity (target interblock time, deterministic coin supply schedule) in energetic balance ’twixt enthalpy (mining) and entropy (forks, time) is pretty straightforward.

The approach of studying codebases and ledgers fragmenting into incompatible but similar network factions doubtless diffused across from Parallel Industries’ TokenSpacecryptographic asset taxonomy research. Combining these with the astronomical observation of stale light from faraway objects and stellar taxonomic tools such as the Hertzsprung-Russell diagram which use a star’s physical properties to understand probable fates, and there’s the makings of misspent summer weekends seeking further conceptual parallels and predictive tools through the joining of celestial and cryptographic dots in the hope of catching glimpses of possible futures through family resemblance.

Writing the paper and crudely crunching chain data looking for patterns and potential heuristics was a great deal of fun, and in the course of doing so inadvertently put my neck on the line a few times. One might call them forkcasts (groan), making some forkward-looking projections (groan again) as to the likely fates of PoW cryptocurrencies unable to attract the majority of hashrate for their particular hashing algorithm, activist fork campaigns fomenting inside discontented growing networks and potential mitigations thereof. In September 2018 I spoke at the second Ethereum Classic Summit in Seoul about forkonomy with speculation on positive and negative possible futures for ETC in addition to discussion of the BTC/BCH situation and the ongoing BTCP clusterfork (okay enough, sorry) with particular emphasis on susceptibility of minority chains to thermodynamic attacks as the bear market extended. Let’s take a look at our three pairs of sibling stars — BTC/BCH, ETC/ETH, ZCL/BTCP — and see how they’ve been getting on in their thermodynamic tugs of love.

Where Are They Now?


Since we last met, two have become three! Who would have thought that a raggedy ensemble of protesters bandying together for various reasons might not see eye-to-eye? After another network fragmentation, further division of already slim hashrates and assorted hostilities on either side of the chain split have left prospects for both BSV and BAB (aka the “new BCH”) looking rather dour. There was an expected amount of drama around the fork event as it was planned and contentious, with threats of inter-chain attacks and aggressive market actions. At time of writing, each of BCH’s spawn command ~1 EH/s in comparison to BTC’s 30–50 EH/s long-term range with market pricing BTC $3500, BSV $75 and BAB $125. Data from and

BCH (grey), BAB (Orange) and BSV (red) network hashrates. Source:

Whereas the difference in price and hashrate between BTC and BCH in August 2018 was approximately 10–15:1, the BSV/BAB split and resultant negative sum implications have lengthened this out to 30–40:1 at time of writing in late January 2019. What was then a marginally vulnerable network to 51% attacks is now at serious risk. Regardless of the amount of SHA-256 hash available on distributed marketplaces such as Nicehash and Amazon EC3, it is feasible that a single entity could amass 3% of BTC’s hashrate and perform a solo attackespecially given the amount of shelved / unsold ASIC inventory available at this time.

Fun story: I wrote an even bleaker forecast for BCH’s future in an earlier draft but pared it back after receiving comments that it may be going too far. Ha! Still, some summer ’18 predictions regarding the increasingly uncomfortable situation that the BCH family find themselves in — between chain security and miner bribes — have not yet come to pass (see below tweet) other than checkpointing on BAB. Both networks are exhibiting ever increasing centralisation of network infrastructure, hashrate and human leadership so expect further mandatory “upgrades”. A lot of them, sometimes at very short notice.

As for Bitcoin, the bear market has had an impact on BTC hashrate, ending a parabolic trend that extended much further than the price. Though the price of BTC today is around half of that in the summer (~$7000 versus ~$3500), network hashrates then and now are both in the 30–40 EH/s range. The security model of Bitcoin’s PoW remains largely untested in the ASIC era, with the only obvious network weaknesses being external entities’ political, technical and regulatory actions, miner / foundry oligopolies, cryptographic vulnerabilities and consensus-breaking code errors in implementations such as CVE-2018–17144. Still some time to go before miner subsidy attenuation becomes a pressing concern with respect to fee market development, with everything depending on BTC price to provide the necessary incentives.

The question remains open as to how L2 appendages such as sidechains and off-chain payment channels will affect this by offering alternative transaction pathways which minimise writing to the blockchain and consequentially demand for block space. Side note on the recent launch of Grin — a network based on the novel MimbleWhimble blockchain construction —with a constant, indefinite coin issuance rate (60/min) which may better mitigate against a lack of a transaction fee market in Bitcoin’s subsidy halving regime, by exhibiting a smoothed and steeper initial decline in effective inflation rate.

Monetary Policies of BTC (blue) and Grin (orange) as demonstrated by effective annual supply increase. Source:


It’s been an eventful few months in the land of Ethereum-based networks. The expected Ethash FPGAs and ASICs have not been spotted in the wild by any great number but their effects may be being felt already. It will be interesting to see if nonce fingerprints will eventually be evident as has been the case for BTC and XMR.

There have been 51% attacks and deep chain reorgs on minority Ethash chains MUSIC, ELLA and PIRL, with exchange double-spending the typical approach for attackers to ROI. PIRL has taken an approach to mitigate these hazards with client-based solutions which would penalise offline nodes for attempting to rejoin the network and broadcast a rapid series of blocks (PIRLguard). UBQ instead changed its hashing algorithm to avoid Nicehash / ASIC susceptibility.

Although a big theme of this work has been looking at the vulnerabilities of minority PoW chains to attack and defensive strategies — and also that this work was presented at the ETC Summit in autumn 2018 — it was a surprise to see Ethereum Classic itself fall prey to these attacks as well. Read the below articles by Phyrooo and Pyskell to put the temporarily disruptive nature of a majority attack into context. However, in these early innings of cryptocurrency, exploits against exchanges provide a strong disincentive for listing minority PoW networks unless precautions are taken with confirmations required for transactions to be considered final. Seeing altcoin exchanges like Cryptopia listing small PoW networks getting constantly exploited (and suspending operations recently) is a universal warning sign, especially for projects with little value proposition other than speculation and trading.

51% attacks aren’t a network failure
In regards to recent events on Ethereum Classic blockchain, I’ve decided to write a bit about 51% attacks since there’s…

Your Exchange Needs More Confirmations: The BitConf Measure
In cryptocurrency we regularly advise against accepting zero-conf transactions but are entirely happy to accept…

It remains to be seen what path ETC will take in order to mitigate attacks, the usual gamut of options are being discussed by stakeholders in a rational way — I was present for the post-mortem call and reiterated my opinion that changing mining algorithm in a knee-jerk response is probably sub-optimal to penalising attackers withholding blocks. It appears that the continued delays of ETH’s attempted transition to a sharded, proof-of-stake network — thereby bequeathing the Ethash majority to ETC or another as-yet-unborn timeline — has exacerbated the issue alongside the protracted bear market and abundance of marshallable hashrate.

There is also discussion of ETH adopting an “ASIC-resistant” algorithm (ProgPoW) while waiting upon Casper and prior to the recent failed Constantinople network upgrade a pro-ProgPoW activist fork faction appeared with the ostensible goal of rejecting the EIP-1234 reduction in mining reward from 3 to 2 ETH per block in addition. It seems inevitable that either (or both) ETH-ASIC and ETH-ProgPoW factions would attempt a fork should the network not move in their favour. Additionally, due to the 11th hour cancellation of the Constantinople upgrade, the so-called “difficulty bomb” has now activated on ETH, having been repeatedly delayed by previous hard forks.

In terms of social layer network politics, both ETH and ETC have had issues of differing types. ETH’s diverse stakeholders are pulling in different directions regarding key technological design choices such as state rent and allegations of insider asymmetry / opacity at crucial meetings. ETC may be suffering from a “tragedy of the commons” scenario as hitherto leading core development company ETCDEV shut its doors due to a funding crunch, with accompanied suspicions of power struggles for prized network resources such as the Github repositories and experienced core developers.

Ratios of hashrate and price between ETH and ETC are approximately 20–30:1, similar to BTC/BAB-BSV ratios discussed above but ETC has an additional light at the end of the tunnel — or is it a “friendly ghost” who will remove incentives for miners to stay on ETH? Data from and

Just going to leave the below few tweets documenting my ETC Summit talk here. We’ll have to wait and see what happens with ETH regarding PoW to observe the effects downstream in the Ethash ecosystem.


The disconnect between market cap and miner incentives for ledger forks such as BCH/BSV/BAB, BTG and BTCP has been discussed widely in recent months (here for example) but it wasn’t as blindingly obvious last summer. Indeed I received some stern criticism from a reviewer on my claim that market caps for minority ledger forks were heavily inflated in comparison to codebase forks. The below tweet sparked the realisation that all was not well in the land of BTCP.

By combining the UTXO sets of ZCL and BTC, BTCP aimed to leverage the Bitcoin name whilst heavily incentivising ZCL holders and buyers. It worked too, in the final “junk rally” of 2018 ZCL pumped 100x in USD terms before beginning a protracted and decline in price of >99%. ZCL is still bumbling along as a semi-zombified chain, with other spin-off ledger forks and fork-merges attempted. The client software got rather out of date and broken, making it hard to run a node over winter, and indeed to find peers and sync the chain.

With only half a million coins remaining unsupplied from the 21M cap, BTCP finds itself effectively a halving ahead of Bitcoin. With a low token fiat price, miners are not sufficiently incentivised to defend the chain and since there is an abundance of Equihash resource available launching thermodynamic attacks would be trivial. Indeed the hourly cost estimates in the paper had to be continually revised downwards, from >$600/hr initially, to <$50/hr now. As the supply schedule of ZCL, BTCP and BTC are directly comparable (4x factor in block time and subsidy to convert) we can think of BTCP as a time machine taking us forwards to the most pessimistic possible future of any Bitcoin-like network with a halving subsidy and fixed supply limit. This is the timeline in BTTF2 where Biff makes it bigtime.

As expected, attacks were inevitable. ZCL has <5% of the ZEC hashrate and BTCP a further order of magnitude less. With Equihash ASICs on the scene they are sitting ducks. Both tokens are in the $1–1.50 price range, with a ZCL pre-fork ATH around $200. Data from and

BTCP forkcast: REKT with a high likelihood of upgrades .What’s next for this white dwarf chain? Pretty much every mitigation you can think of has been discussed — Horizen’s chain selection rule update seems to be working for them.

Something else interesting and related! The wizards at CoinMetrics who I had badgered to run BTCP and ZCL nodes last summer, recently uncovered a grand heist with ~2 million coins secretly added to BTCP’s shielded pool at the time of inserting the BTC UTXOs into the ledger. Indeed I had a great deal of problems getting the BTCP client to play nicely, as the few thousand blocks around the time of the operation were enormous and often crashed my workstation when parsing data for analysis. BTCP is the worst of all possible worlds.

iv) Miscellany

Assets atop forked networks

There was a brief note in the paper on security risks of “top heavy” networks, where for example Ethereum can allow for a greater “value” of issued non-native tokens than the base protocol token. Read the great article below by Joe Looney to get a fuller understanding of the various hazards subsumed within this. Let’s think about how non-native assets could be used as bargaining chips by forkers. Offering to honour assets on a ledger fork network may skew hodler’s incentives in ways that are hard to predict.

The Real Cost of Cryptogoods
The “realness” of these tokens is, in many ways, the most important facet to consider as both a token issuer and a…

#forkgov: Fork-resistance and governance

In the original paper Tezos and Decred were discussed as networks addressing network governance by inhibiting forks in different ways. 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. 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 after 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 and

50 day moving average of DCR staking ticket price. Source:

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”

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 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 on / 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?”

Conclusions & Future Directions

As with astronomy, there are no conclusions in forkonomy. Only endless observations as entropy drives time along. More work needs to be done analysing blockchain data harvested from nodes, especially on ZCL and BTCP. The quest for candidate network heuristics and tools continues. Studies of Decred’s Politeia proposal & voting system now that it’s operational would be interesting too.

Which is your favourite fork?


Thanks to Richard Red for details and resources regarding Decred’s PoS and ticketing mechanism.

Reaching Everyone, Pt. II: Resilience, Censorship-Resistance and the Bitcoin Blockchain

Source: Kevin Durkin for In The Mesh

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

This article is the second in a four-part series by Matt B (@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.

The detrimental effects of government-mandated money — and conversely, the benefits of sound money adoption — were discussed in the previous article in this series, as were the properties that make Bitcoin a powerful and permissionless alternative to fiat. In this piece, we’ll focus on the technology that makes the protocol so robust and why that matters in today’s world. It’s wise to first provide a definition for Bitcoin, not an easy task. As a complex ensemble of components giving rise to a series of emergent behaviours and phenomena, the what of Bitcoin appears to have a lot of subjective baggage attached. Bitcoin scribe Nic Carter has tackled some epistemological and ontological perspectives of Bitcoin, as informed by wider phenomenology.

The Bitcoin name refers to several things: the broadcast ‘push’ messaging protocol, the peer-to-peer network of nodes running client software and UTXOs (unspent transaction outputs) or ‘pieces of bitcoin’. The record of transactions between users’ addresses is notarised using a high-assurance data structure — the ‘blockchain’ — which is synchronised across the network’s nodes allowing a ledger to be constructed permissionlessly by anyone who runs the Bitcoin client software. The global state of the transaction history is kept in agreement. The true state of the ledger is maintained by the thermodynamic competition to create blocks (Proof-of-Work, or PoW ‘mining’), ensuring that massive expenditure of computational power and energy would be required for a prospective attacker to rewrite the blockchain and therefore alter Bitcoin’s historical record. Miners are rewarded with bitcoins for winning the race to find candidate blocks and broadcasting them to the network, provided the protocol has been followed and the network reaches agreement on the next block to be added to the chain. Transactions are included in each block, the order of which is determined by a ‘fee market’, with higher priority transactions incentivising miners to include them with above average fees.

From a user’s perspective, Bitcoin is a payment system that allows them to send payments without regard for borders, governments or geographical distance. Once a transaction has been included in a block, it is said to have a single confirmation. With each subsequent confirmation, it becomes harder for an adversary to reverse, alter or censor it. In times of normal network operation, a transaction is considered final and spendable once it has six confirmations — though in reality the finality is probabilistic rather than absolute. In other words, it is extremely unlikely to be reversed, rather than impossible. Though Bitcoin has not experienced large-scale reorganisations of its ledger history (so-called ‘majority’ or ‘51%’ attacks), it is becoming an increasingly common occurrence in smaller PoW networks. As a user, what could be less confidence-inspiring than the prospect of storing your precious value in a fragile network which gets disrupted relatively easy and often? It’s akin to leaving your front door ajar and wondering why things keep getting messed up.

The one-way SHA-256d hash function plays an integral role in the Bitcoin ecosystem (and in the wider field of public-key cryptography), leveraging the asymmetry of ‘guessing’ or ‘brute-forcing’ a private key associated with a public key versus the ease of proving that said public key is associated with the private key. Similarly, blocks are very difficult to ‘guess’ (enter the PoW algorithm), but it’s trivial to prove that one has been found.

In essence, the hash function is a deterministic process which takes a piece of information (of any length) and returns a piece of information of a specific length. Think of such a function as a meat grinder — you can put a cut of fine Kobe beef through one to produce mince, but it is all but impossible to reverse-engineer the original.

Despite ecocentric narratives around “Bitcoin boiling the oceans”, PoW is the most secure, equitable and effective mechanism for the addition of a block that exists today. It’s entirely possible to swap the algorithm for a consortium or single party creating new blocks via some other mechanism, but this would sacrifice the entire value proposition by centralising production and validation. The notion of ‘autonomous entry’ is vital to the decentralisation of Bitcoin, and, by extension, its most attractive characteristics encapsulated by resilience against external control and coercion: permissionlessness (anyone can be part of the network), censorship-resistance (anyone can transact) and immutability (transactions are final). Since its launch in January 2009, the network has enjoyed 99.983% uptime.

Decentralisation isn’t easily reduced to a binary phenomenon, more closely resembling an emergent, complex and multidimensional spectral characteristic. The notion was originally espoused by de Toqueville as an antonym to the centralisation of state power before and after the French Revolution. A number of approaches to characterise decentralisation as a meaningful or even quantifiable metric have been made, with varying insights and approaches. In a given network, you’ll probably want to consider a myriad of different factors such as the technology, the organisation (or lack thereof) of the participants, the data structures that host the historical record and the topology of the network itself. To all intents and purposes, Bitcoin fares quite well with all of these metrics — hashpower centralisation may be an issue, though game theory and “skin in the game” due to sunk costs in equipment outlay would in most circumstances incentivise an actor in possession of a significant amount to act honestly. An example of this was the mining pool which breached 50% of network hashrate in 2014, before widespread commotion and redistribution of computational resource. The exodus was so pronounced that the pool ceased to exist shortly afterwards.

Source: Kevin Durkin for In The Mesh

Let’s attempt a finer grain perspective of what these concepts embody employing this layered approach. Immutability is an attribute primarily observed at the protocol layer — upon which the monetary layer depends for persistence — ensuring the inability of stakeholders or adversaries to alter the transaction record and thereby balances. Censorship-resistance is also primarily observed at the protocol layer, as valid transactions of any type are not prevented from being broadcast to the P2P network, included in blocks and recorded in the network’s shared ledger.Permissionlessness can be regarded as a related phenomenon on the social layer, where no persons or entities are prevented from broadcasting transactions and being included in the ledger, so that anyone can participate and use the network without prejudice.

Decentralisation itself can be taken to mean different things when considering the various layers in our model. Protocol decentralisation would refer to distribution of nodes fully validating the ledger from it’s genesis and incentives for mining and validation of transactions and/or blocks. Monetary decentralisation can be assessed by studying inequality in the concentration of asset distribution, though this is an imperfect heuristic in cryptocurrencies as an entity may control many public keys, which in turn can generate many addresses. A more pressing issue is the quantity of bitcoin held by centralised exchanges — Coinbase alone custodied at least 5% of all BTC as of late 2018.

Social decentralisation pertains to the decision-making and consensus reaching methods of a network, and whether some subset of stakeholder constituents are able to exert undue degrees of explicit or implicit influence over a network’s outcomes. The “implicit user contract” of Bitcoin has been described recently as a positive feedback loop between the protocol and social layers reinforcing each other, and also as an intersubjective consensus arrived at by a distributed group of users, similar to the game theoretical notion of a focal or “Schelling” point.

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. For example, a recent critical vulnerability in some versions of the “reference implementation” of Bitcoin’s software client — Bitcoin Core — would have allowed an adversary to crash mining nodes on the network and clandestinely create further supply of bitcoin UTXOs, thereby violating the supply cap. There was little resistance to fixing this as it was deemed to be an obvious software bug in clear contradiction of the implicit but mutually understood ‘rules of Bitcoin’. However a similar issue became extremely contentious in the Ethereum network in 2016 following the catastrophic failure of an investment-focused smart contract suite known as “The DAO”, leading to a network split as actions taken to delete certain balances including some “child DAOs” (that were not ascribed to the attacker) was considered a violation of the network’s immutability and the promise of “unstoppable applications”. This led to the creation of a new network keeping the Ethereum name, and a continuation of the original network’s philosophy known as Ethereum Classic, where a significant minority of the original Ethereum community continued mining, developing and maintaining the network built around the canonical blockchain.

Though the above events were both related to unintended function of network software, the lack of contention with the recent Bitcoin Core vulnerability (CVE) as compared to the Ethereum network fragmentation following the exploitation of The DAO can be rationalised by examining the differences in the two sequences of events. The Bitcoin Core bug affected a wallet implementation, whereas The DAO was a suite of on-chain smart contracts holding around 15% of all ETH supply. Secondly, the Bitcoin Core CVE was responsibly disclosed and promptly patched by most miners (who were the most vulnerable to exploitation) whilst Ethereum was perceived to have handled The DAO situation poorly, despite multiple researchers publically calling for caution and further code auditing prior to launch. Finally, there was significant disagreement over the best way to proceed in light of The DAO’s failure, with a number of solutions proposed. An on-chain “carbon vote” was taken to assess the network stakeholders’ moods, though this was marred by low turnout and large votes by single blocs of whales and insiders.

Bitcoin’s key characteristics — scarcity, decentralisation, immutability, censorship-resistance and permissionlessness — are a result of careful design and development over the past decade and represent some of the most significant achievements in computer science and engineering to date. That being said, much work remains to be done in order to realise the ultimate potential of cryptocurrency as an impenetrable guerilla financial armoury empowering the dispossessed peoples of Earth against authoritarianism and oppression.

Next up at In The Mesh: two more instalments in this series and more on the potential of cryptocurrency to empower those living under authoritarianism.

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

Images by Kevin Durkin for In The Mesh

Reaching Everyone, Pt. I: The Need For Sound Money Outside of the Wealthiest Territories

Reaching Everyone, Pt. I: The Need For Sound Money Outside of the Wealthiest Territories

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

This article is the first 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.

In developed nations, the widespread adoption of Bitcoin may not seem all that urgent to many. Indeed, it would be reasonable to say that its need at the individual level hasn’t yet widely manifested itself. While everyone’s excited about Lightning Network transactions overtaking existing fiat gateways for buying coffee or paying for bus tickets, the fact is that if some critical security flaw caused the irreversible collapse of the Bitcoin network overnight, we’d survive. Life would go on. The legacy financial infrastructure is relatively stable in many nations — at least in the short-term. Where cryptocurrency can shine brightest is in areas where economic and/or political actions of governments are failing.

Indeed interest and use of Bitcoin and cryptocurrency generally appears to be on the rise in regions where individuals are desperately in need of forms of wealth and value transfer that cannot be confiscated, debased or censored by authoritarian governments, local mafias or cartels. This has traditionally been difficult.. The state printing press is a machine that, left unchecked, can recklessly and often surreptitiously add to the existing monetary supply in such a way as to cause hyperinflation, a disaster we’ve seen unfold in the Weimar Republic in the 20s and the latter stages of the Roman Empire, and in VenezuelaIran and Zimbabwe at present. As for commodity monies, they have been subject to confiscation and dilution in the past — consider Executive Order 6102 in the US, where the government coerced citizens into turning over bullion and coins.

Aristotle defined the desirable properties of money in the fourth century BC as transportability, fungibility, scarcity and divisibility. Bitcoin largely satisfies the criteria above — analogous to the mining of precious metals, the generation of Bitcoin blocks requires significant expenditure on the part of the miner (hardware, electricity, infrastructure and running costs) to acquire a provably scarce asset with a total supply capped at 21 million coins. Arguably, this makes it rarer than gold, whose supply constraints are merely presumed, and current valuation does not account for that which simply isn’t economically feasible to extract — i.e. in Earth’s oceans or in space.

Like precious metals at present, synthesising a Bitcoin, outside of the parameters explicitly permitted by the network in the form of mining, is impossible. Any attempt at doing so would simply be incompatible with the network. Each coin can be divided into 100,000,000 units, and one UTXO (unspent transaction output) unit is functionally equivalent to another — though there are current limitations to the fungibility of Bitcoin insofar as tainting and blacklisting is concerned. (In an upcoming piece, we’ll be covering some in-protocol and extra-protocol solutions to these challenges).

Evidently, hard money existing in cyberspace would present numerous benefits over physical alternatives: concealability, plausible deniability, programmability, portability and easy global transmission. Precursors to Bitcoin such as Wei Dao’s b-money or Szabo’s bit gold made strides in the direction of solving key distributed computing problems involving the double spending of digital money, although they were imperfect as degrees of centralisation were required prior to the use of proof-of-work and chain selection rules as a mechanism to mitigate Sybil attacks and reach network consensus. Whilst there’s a push towards institutionalising Bitcoin as a marker of establishment acceptance, that was never what the cypherpunk and crypto-anarchist movements from which it originated saw as important. Both have always focused on liberating individuals by arming them with cryptographic tools and protocols to defend their sovereignty from would-be oppressors, hierarchies, rulers and dominators.

2017 report from Freedom House indicates that over half of the world’s countries are ruled by governance structures considered to limit citizen freedom. Of the 195 countries assessed, 87 (45%) were rated ‘Free’, 59 (30%) ‘Partly Free’, and 49 (25%) ‘Not Free’. A common theme that appears to prevail in countries deemed ‘not free’ is the exertion of monetary and economic domination as a key mechanism of social control. This is typically achieved by issuing weak or undesirable fiat currency, which does not retain purchasing power over time due to mismanagement of the monetary issuance policy due to incompetence or malice — or some combination of the two.

The possibility of secure digital money has unbridled potential for both those living under authoritarian regimes, as well as those seeking to escape them. While it may take decades to see Bitcoin cannibalise fiat currencies, it already has great potential as a contender to them. A monetary system operating in parallel to a state-enforced one redistributes the power from the incumbent issuer to the population, and dampens the effectiveness of the state printing press.

Next up at In The Mesh: three more instalments in this series and more on the potential of cryptocurrency to empower those living under authoritarianism.

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

Images by Kevin Durkin for In The Mesh