Jon Matonis is resigning as executive director of the Bitcoin
Foundation, a trade group that supports and advocates for the
development and expansion of bitcoin, the digital currency.
Effective
Friday, Mr. Matonis will be replaced by Patrick Murck, who has been the
foundation’s general counsel. Messrs. Matonis and Murck, both founding
members, played key roles containing the fallout surrounding bitcoin
during some harmful scandals...
A formal ISO currency code will spur global mainstream adoption of bitcoin more than any other single action.
When a new currency code becomes adopted by the independent and nonpolitical International Organization for Standardization (ISO), it immediately enters the database tables upon which Visa, MasterCard, PayPal, SWIFT and other clearing networks rely.
ISO 4217 is a standard published by the ISO, which delineates
currency designators, country codes (alpha and numeric) and references
to minor units in three separate tables.
Now, a distributed currency having an identifiable code in a centralized database may not seem like much of an accomplishment.
However, when we consider what this means for integration into
existing networks, trading systems and software accounting systems, it
becomes much more significant. All the more so when we consider that a
code prefix of 'X' denotes a non-national affiliation or a monetary
metal such as gold or silver.
Instantly, bitcoin as XBT will be available as a selectable clearing
and settlement unit for any business that chooses to offer and implement
bitcoin. Of course, designing and managing the necessary settlement and
hedging mechanisms will be a different matter altogether. Certain
clearing networks may effectively become bitcoin exchanges.
With the three-character code having been in informal usage since early 2013, a formal application for XBT is nearing completion by the Financial Standards Working Group within the Bitcoin Foundation. This effort has its origins in a petition submitted by Emelyne Weiss that circulated on Change.org, the world's platform for change. The petition closed with 836 supporters.
Since the decentralized bitcoin has a peer-to-peer block chain rather
than an 'official' currency manager, a central bank or an existing
institution such as SWIFT may also be necessary to support the ISO
application for XBT. As leaders of financial innovation through their Innotribe
initiative, early indications from SWIFT senior management are that
they would be supportive of such an application, if required.
Recently, the topic of XBT and the need to standardize various subunits has been much debated on Reddit
and other social media outlets, unfortunately causing more confusion
than clarification. Let's examine some of the top-level issues.
Why was XBT selected and what happens to BTC?
The code XBT was selected because the prefix 'X' denotes a
non-national affiliation or a monetary metal such as gold or silver.
Technically, BTC would be unavailable due to the fact 'BT' already
represents the country of Bhutan.
The first two letters of the code are the two letters of the country
code (as with national top-level domains on the Internet) and the third
is the initial of the currency itself. In the case of the dollar (USD),
US represents the country and D represents the initial of the currency.
Most likely, BTC would still remain in colloquial usage because it is already widely recognized by the community. Just as slang terms
for money exist around the world, BTC shorthand would be used similar
to how 'bucks' or 'quid' are used for other currencies. In this
scenario, I expect BTC to continue to represent one full bitcoin unit.
Why does XBT have to represent a full unit of bitcoin?
One XBT unit as listed and recorded within ISO 4217 would have eight
subunits or decimal places to the right of the decimal point. The
rationale for this is that a neutral global default for bitcoin around
the world cannot deviate from the unit's representation on the block
chain (as expressed in the reference implementation) and the bitcoin
integer in the core protocol is not changing.
One bitcoin on the block chain must equal one bitcoin in the formal
standards world or else processing errors would be potentially
catastrophic.
Even though eight decimals was selected as the starting point for the
bitcoin integer, that number may need to be increased over time and
increasing the amount of decimal places for bitcoin would hardly be a
contested issue by the miners when the time comes.
The code representation within ISO 4217 cannot be changed up and down
due to the varying number of decimal places in the core protocol. It
must remain static.
Bitcoin is correctly placed, alongside gold, as a digital
cryptographic commodity. So, just as gold (XAU) may trade in some areas
as kilos or kilograms, the global default standard for pricing and
measuring quantities of gold bullion remains the troy ounce.
One troy ounce is currently defined as 31.1034768 grams and is equivalent to approximately 1.09714 avoirdupois ounces. XAU denotes one troy ounce of gold and 'XAU/USD' means the price of 1 troy ounce of gold in US dollars.
How are the subunits related to XBT and the ISO standard?
Despite the fact that several names for bitcoin's minor units have been proposed, only three of the minor units, or subunits, have achieved a consensus within the bitcoin economy.
The third space after the decimal point (10−3) is commonly referred to as 'millibit' or mBTC. The sixth space after the decimal point (10−6) is commonly referred to as 'bit' or μBTC. The eighth space after the decimal point (10−8) is commonly referred to as a 'satoshi', the smallest available amount of bitcoin today.
These existing minor units of bitcoin will be submitted in the ISO
application for XBT and it is not required for all of the individual
minor units to be submitted.
To better facilitate consumer applications, some
bitcoin operators may elect to provide a choice for display
preferences. Several applications and web sites, such as BitcoinAverage, already permit toggling between bitcoin and millibit for display purposes.
Recently, some exchange operators have also expressed an interest and willingness to display prices in bits, so that only two decimal places exist to the right of the integer. For instance, KnCMiner embraced
the bits display option for its wallet app. These moves could be
especially useful for accounting packages that typically accommodate
only two decimal points.
Strong opinions exist on all sides for going to a bits display, a millibits display, or remaining with a full bitcoin display.
As a consensus emerges, it is also perceived as useful to utilize one
expression for retail consumers and to maintain a full bitcoin
expression for wholesale level or institutional trading. This structure
is entirely achievable because dual display options can be easily
adopted by software providers.
WASHINGTON, D.C. (October 7, 2014) — The Bitcoin Foundation (/)’s Financial Standards Working Group is underway with chairperson Beth Moses, an aerospace engineer, formerly with NASA and now with Virgin Galactic, at the helm. The group’s priorities for 2014 Q4 and 2015 Q1 will focus on applying for ISO 4217 approval for a Bitcoin currency code as well as drawing up recommendations for a Bitcoin currency symbol and Bitcoin subunits.
“Standardization is an important step towards removing obstacles for mainstream adoption — this is especially true with a technology for financial innovation that is global in reach,” said Jon Matonis, Executive Director of the Bitcoin Foundation.
The first task of the Financial Standards Working Group will be to apply for ISO 4217 approval for a Bitcoin currency code. Obtaining an internationally recognized currency code for Bitcoin will enable more fluid international transactions and currency conversion. ISO 4217 is the International Standard for currency codes and currencies are traditionally represented as a 3-letter alphabetic code. Currently, BTC is the leading candidate as it is in common use globally. However, ISO 4217 standards expect a leading letter “X” for global commodities like gold (XAU) and emergent supranational currencies like the precursor to the Euro (XEU). To this effect, some leading foreign exchange tools and services have already adopted the leading code “XBT” such as Xe.com, Oanda and Bloomberg.
Secondly the working group will examine the options for and recommend a Bitcoin currency unicode symbol. A currency symbol (https://en.wikipedia.org/wiki/Currency_symbols) is a graphic symbol used as a shorthand for a currency’s name, especially in reference to amounts of money. Many are familiar with $ for USD, € for Euro and ¥ for Yuan. Currently, the leading symbols for Bitcoin are B , ฿, and Ƀ. The working group will deploy a consensus based process for reaching an agreement for the official currency symbol. In addition, the working group will recommend Bitcoin subunits. In a currency, there is usually a main unit (base), and a subunit that is a fraction of the main unit. Currencies today operate with two decimal spaces to the right ($1.00). In Bitcoin, there are currently eight so one could theoretically pay you 0.00000001 or one hundred-millionth of a Bitcoin. Not only is this confusing for consumers, it does not fit in existing systems and software for accounting practices.
With a shared goal of achieving standardization for mainstream adoption, the volunteer working group of 20 Bitcoin Foundation members is led by volunteer chair Beth Moses, who led the standardization and testing of extravehicular interfaces for the International Space Station while at NASA. Like the International Space Station, Bitcoin is an emerging technology with global implications that requires a shared, basic language in order to enable successful mainstream utilization.
The working group will be hosting roundtable discussions with industry leaders, experts, and stakeholders in the coming weeks.
ABOUT // Established in July 2012, the Bitcoin Foundation (/) is the world’s first and leading member- driven non-profit digital currency trade organization dedicated to serving the business, technology, government relations, and public affairs needs of the Bitcoin community. The foundation works to protect and standardize the Bitcoin protocol and software, to broaden the use of Bitcoin through public education and by fostering a safe and sane legal and regulatory environment, and to support local Bitcoin efforts by connecting a network of Bitcoin communities worldwide. Think Globally, Act Locally. Join us! (../../join/)
The ultra-resilient bitcoin network is the world's largest
distributing computing project in terms of raw computational power,
having long ago surpassed 1 exaFLOPS (1,000 petaFLOPS) – over
eight times the combined speed of the top 500 supercomputers.
Although since increasing to an amazing 3.2 zettaFLOPS (3,200 exaFLOPS), the project was quietly removed from Wikipedia's list of distributed computing projects. This is probably due to the fact that the exaFLOPS estimate breaks down with bitcoin's specialized ASICs, since they are not capable of floating-point operations.
Instead, the estimate may be used for estimating how well other
supercomputers and distributed networking projects would be able to mine
bitcoin, since supercomputers have the capability to perform the
integer operations used in hashing.
Therefore, today's fastest supercomputer, China's Tianhe-2 with a performance of 33.86 Pflop/s, would measure at about 0.001% of the bitcoin network.
Monitoring network health
As bitcoin matures and starts to compete with legacy retail payments
networks like Visa and MasterCard, and wholesale networks like Swift,
the health of the decentralized network becomes vital to its performance
capabilities.
Community site Bitcoin.org does an excellent job of maintaining the historical archive of network status alerts and vulnerabilities.
The assembled report below lists the critical statistics for
monitoring the ongoing health of the distributed bitcoin network,
covering the measurements important for reachability, scalability,
security and transaction processing speed.
Bitnodes estimates the size of the bitcoin network by finding all the
reachable nodes in the network. The current methodology involves
sending getaddr message
recursively to find all the reachable nodes in the network starting
from a set of seed nodes. It performs this polling every 24 hours and
displays the results on a world heat map of countries, including
rankings and version of bitcoin reference client.
Source: Bitnodes
The Bitnodes Project launched in April 2013 with the Bitcoin
Foundation’s sponsorship as a community resource. The project's latest
report can be seen here.
Source: BitcoinStats
The information exchange in the bitcoin network is all but
instantaneous. Exactly how fast is information being propagated in the
network though? Maintained by BitcoinStats, the propagation evolution
chart shows the 50th percentile of the inv-messages received by
peers (ie: the plot shows the time since a transaction or block enters
the network until a majority of nodes has received and processed it).
DNS seeds are used by almost all bitcoin clients to identify a set of
nodes to connect to when starting. The seeds are run by volunteers
using a multitude of mechanisms to ensure the returned seeds represent a
good sample of nodes currently online.
Source: BitcoinStats
Except for bitseed.xf2.org, the seeds aim to return nodes that are
currently online and reachable. Also provided by BitcoinStats, the chart
shows results from regular bootstrap attempts using the seeds with the
plot representing the average hourly connection success rate for each of
the seeds. The closer to 100%, the better the seed is.
An auxiliary chart with response time of DNS seeds to queries is also
provided, which indicates the response times in milliseconds (ms)
elapsed between sending the query and receiving a response.
Provided by developer Pieter Wuille, this series of graphs display
hashing difficulty and the estimated number of terahashes per second
(computation speed) that the network is performing for various time
windows (1 terahash equals 1,000 gigahashes).
Calculated by dividing maximum target by current target where target is a 256-bit number, difficulty measures
how difficult it is to find a new block compared to the easiest it can
ever be. Difficulty adjusts every 2,016 blocks (or two weeks) and to
find a block, the SHA-256 hash of a block’s header must be lower than or
equal to the current target for the block to be accepted by the
network.
This pie chart from Organ Ofcorti is an estimation of hash rate
distribution amongst the largest mining pools at a weekly interval. It
is important to monitor because the integrity of the network depends on a
single actor not exceeding 50% of the overall hashing power.
Source: Organ OfCorti
A table of solved block statistics lists all statistics that can be
derived from the number of blocks a hash rate contributor has solved for
the past week. Block attributions are either from primary sources such
as those claimed by a particular pool website, or secondary sources such
as coinbase signatures, or known generation addresses.
When dependent on secondary sources only, data may be inaccurate and
miss some blocks if a particular block-solver has gone to some trouble
to hide solved blocks and this will result in an underestimate of the
block-solver hash rate.
An alternate chart across 24-hour, 48-hour and four-day time horizons is provided by Blockchain.
Produced by Coinometrics, this metric attempts to measure the
likelihood and prevalence of bitcoin miners engaged in a subset behavior
of the 'Selfish Mining' strategy, as described by Ittay Eyal and Emin
Gün Sirer in their paper, Majority is not Enough: Bitcoin Mining is Vulnerable.
Source: Coinometrics
Since the bitcoin protocol relies on miners following the rules laid
out by the software, as soon as miners have found a block they need to
announce it to the network.
Selfish mining defies this rule, because certain miners, once they
have found a block, can withhold it from the network and start working
on their next block. Once they have a number in their hidden chain, they
can release them to invalidate the blocks that the network thought were
part of the main chain.
The lower the probability that at least k (actual
distribution) blocks will be found in the time represented by the first
bucket, the more likely that miners are engaging in quick succession
behavior under the Selfish Mining strategy.
Coinometrics explains:
"One way to estimate the likelihood of such a strategy
being implemented is to measure the distribution of the time between
blocks against the expected distribution. The rate of creation of
bitcoin blocks is determined by how quickly the first miner solves for a
hash meeting the difficulty requirements of the protocol. Every attempt
to meet this difficulty has a set probability of being correct. By
definition, the probability is independent between hashes. As a result
the rate at which blocks are generated should follow an exponential
distribution."
Source: Blockchain
Orphaned blocks are valid blocks which are not part of the main
bitcoin block chain. They can occur naturally when two miners produce
blocks at similar times or they can be caused by an attacker with enough
hashing power attempting to reverse transactions.
Initially accepted by the majority of the network, orphaned blocks are
those that are rejected after proof of a longer block chain is received
that doesn't include that particular block. In other words, a user
could see a transaction as having one confirmation and then revert to
zero confirmations if a longer blockchain was received that didn't
include the transaction.
Blockchain maintains a real-time monitor for double spends detected
in the last 500,000 transactions utilizing a 10-minute cache. This could
be used to alert users to potentially malicious transactions on the
network.
Source: Blockchain
Blockchain also maintains this live updating list of new bitcoin
transactions waiting to be included in a block. The monitor displays
total number of unconfirmed transactions, including total fees and total
size in kilobytes.
Source: Blockchain
This measures the average (mean) amount of time in minutes that it
takes for a transaction to be accepted into a block. Reasonable
estimates differ on the amount of time and confirmations for a
transaction to be considered cleared and ‘good’, but that appropriate
risk level would be associated with the transaction’s value.
Source: Blockchain
The block chain total size is important because of the storage space
considerations as it grows as well as the time it takes for initial
synchronization after installing the reference client for the first
time. This measurement shows total size of all block headers and
transactions not including database indexes.
Source: Blockchain
Measured here in fractions of a megabyte, the block size will become a heated debate once the bitcoin network starts approaching its current throughput limit of approximately seven transactions per second.
Ultimately important for scalability, the stated block size limit
will have to be increased, linked to another variable, or remain the
same with more confirmations pushed off chain, each path having
corresponding implications for decentralization of the system.
Please let us know in the comments section below if we have
omitted any measurement critical to network operations or if any
references are out-dated.
I am an e-Money researcher and a Founding Director of the Bitcoin Foundation. My career has included senior influential posts at Sumitomo Bank, VISA, VeriSign, and Hushmail.
"Free-market protagonists, such as Matonis, regard cybercash as better than traditional government-issued or -regulated money, because it is determined by market forces and thus nonpolitical in nature." --Robert Guttmann, Professor of Economics at Hofstra University, in Cybercash: The Coming Era of Electronic Money, 2002
"Matonis is quite correct that the new technology makes easier the use of multiple private currencies." --Mark Bernkopf, Federal Reserve Bank of New York, in "Electronic Cash and Monetary Policy", 1996
"Matonis argues that what is about to happen in the world of money is nothing less than the birth of a new Knowledge Age industry: the development, issuance, and management of private currencies." --Seth Godin in Presenting Digital Cash, 1995
