Fundamentals of a possible new Bitcoin-fork (Bitcoin 2.0)

The exchange of encrypted currency in digital form like the exchange of data in a peer to peer networks is a new idea and one with great potential. To be able to come up with the potential it contains, it is important that all potential users can understand the way it works and why it brings a great improvement in economics. The most important thing for crypto currencies is to guarantee the key futures for a long term. That means the independence from state control and any monopolistic control has to be verifiable for everyone who wants to use crypto currencies.

Satoshi Nakamoto is the secret founder of Bitcoin and the Blockchain technology. Secret means his identity is not fully known. Mr. Nakamoto laid down in his 9 page long paper the fundamentals of a possible crypto currency. Out of that Bitcoin was born. Since then the Bitcoin community made an astonishing rise. Today it has a market capitalization of almost 7 billion dollars. That is huge for a currency which is almost completely independent from any central bank or private enterprise at the moment. But this 7 billion dollars is far away from the potential a crypto currency has. So the question is what needs to be done to improve Bitcoin and the alternate coins to make it a new world wide currency?

That’s what is going to be discussed in this article. I cannot give a perfect solution for the future but I want to write down some ideas which might help to improve the way bitcoins and (alt)coins are mined and traded nowadays. I also welcome any comments to this article. Please feel free to discuss my ideas and help to improve crypto currencies. The final goal is to help to implement Bitcoin or any alternative coin on full scale.

First I want to cite Mr. Nakamato´s abstract(https://bitcoin.org/bitcoin.pdf):

“A purely peer-to-peer version of electronic cash would allow onlinepayments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending. We propose a solution to the double-spending problem using a peer-to-peer network. The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work. The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power. As long as a majority of CPU power is controlled by nodes that are not cooperating to attack the network, they’ll generate the longest chain and outpace attackers. The network itself requires minimal structure. Messages are broadcast on a best effort basis, and nodes can leave and rejoin the network at will, accepting the longest proof-of-work chain as proof of what happened while they were gone.”

I have marked in bold the most important things in his abstract. The days when Mr. Nakamato started the Bitcoin era, he could not anticipate that companies would invest so much to build ASIC-miners for mining on large scales. Mining on such a large scale is the beginning of the problem: A few people would be able to attack the network if they have the power to build a mining monopoly. Especially if in the future more and more power is needed to solve the blocks. It is obvious that someone who has a lot of money can influence and control the market. Investing a big amount of money is not the problem. The problem is to be able to control the blockchain with the power big companies or even governments have. I do not want to critisize people who want to invest a lot into mining technology, I just want to prevent, that people can control the blockchain of Bitcoin or any other virtual currency. Of course it is fine to build ASIC miners and to improve them, but it is important that there is some verifying technology to make sure that it is really used for mining coins only and not to create a monopoly. Also in the future when more and more people will accept a crypto currency on global scale the finance industry will turn to crypto currencies to control them not just to use them. The finance industry earns a lot of money with transaction fees and flow control. This earnings would stop when Bitcoin would rule more and more of the currency world.

There are lot of suggestions of the Bitcoin community to implement a hard fork to prevent mining monopolies. For example there is a very good solution from hackingdistributed.com on howto implement ways that mining pools cannot be used for 51% attacks. To sum up: they want to change the algorithm in a way that a miner in a pool can get away with all the coins mined by all after a block was solved. The possibility of this to happen should increase if the Hashpower of the pool exceeds a certain level. This level can be also adjusted in the code. This sounds good and is really necessary, but it does not address the other main issues:

– Mining monopoly by one big super computer.

– Verification for each user that there is no misuse by powerful companies or other individuals or even governments.

I think most of us know that these are the main issues and to be able to prevent such a control I suggest the following:

Implement a location stamp on each mined bitcoinpart which shows everyone where it was mined. Even at small mining pools the location of each user who got a portion of the coin also has to be stamped when they receive this coin. It may sound crazy at the moment and a lot of people will ask how is it possibleto determine the location of someone and wouldn´t that be control and surveillance?

First it is important that we have a lot of clients and miners, who are not centralized like in a large Mining-Pool. So the solution from hackingdistributed.com has to be also implemented in a hard fork. But to determine the “digital location” I would send out “ping” requests from each client and miner to each other. So basicly all clients and miners are measuring the round trip delay. By the mass of information of the roundtrip delay they can calculate the “position” stamp. Through this response time pattern we could map them on a virtual location map. That means the “real position” through this response time pattern would determine where someone is mining or spending coins. These location stamps also could be implemented into the Blockchain, so that everyone can verify the decentralization of the network. Certainly this requires a lot of individual miners and clients. This would help to prevent misuse. For this purpose only the mining of a specific amount of Bitcoins should be possible at specific “digital pattern positions”. Due to the mass of clients who validate this “position” through the response time patterns it would be very difficult to fake this. It would also give the implementation of a control loop or some kind of smart firewall which could anticipate attacks or misuse. The clients who are making transactions between each other can react on their own to threads.

So let’s sum up the important points of this change suggestion:

1. To prevent a mining monopoly, a miner at a specific location in the cyber space only is able to mine a specific amount of new coins at a geographical point and time, because the ping response pattern would determine its location. The mass of peer to peer clients will determine the unique pattern. I am going to prepare a more detailed explanation of this.
2. The mass of individual and decentralized clients is vital to be able to determine unique unfakeable position patterns from request-response times from the peertopeer network.
3. The “position” stamps of the miners and clients are implemented into the blockchain and make it verifiable for everyone wheathear the network is corrupted or not.

In this way the person who wants to control the network has to change locations to control the Blockchain, but economically it would be more easier to sell or rent the hardware to other miners. In this way it can be set into the blockchain that the mining can spread everywhere and only together in a decentralized way it will be possible to mine the remaining Bitcoins. In such an environment it is impossible to control all the hardware to make an attack to manipulate Bitcoin or to destroy it. And through this solution we would get a completely decentralized currency network which would change the way how we pay and make trade on the whole word.

Work:

As a first step I want to start a project, similar to the bitcointmonitor project:

http://www.bitcoinmonitor.com/

But in my case I want to build a software where I make the traces of Bitcointransactions visible on a worldwide map. I have not found anything similar to that yet. If someone knows a tool like that please comment on this article and put in the link. And certainly people who are interested into joining in for this project please let me know. I would like to start a new open source project to see how this could be done. I need some support.

In my next article I will introduce a new way of marketing with the Blockchain technology. So stay tuned. I hope also will able to post to other topics soon.

Yours,

Andreas