Who is behind Satoshi Nakamoto?

Although the identity of Satoshi Nakamoto is still unclear, there is no doubt about what he created: he is the inventor of the Bitcoin protocol, which he published in a white paper in November 2008 via an encrypted e-mail address.

In 2009 he installed the first Bitcoin client and communicated with the Bitcoin community until the end of 2010. After that, he disappeared from the scene without a trace.

Initially, he worked with an open source team on the project and attached great importance to not disclosing any personal information. Last heard of him in the spring of 2011 when he said: “I will now devote myself to other things.”

Was he Japanese?

You shouldn’t judge a book by its title. Or is it? “Satoshi” means “thinking clearly”, “Naka” could mean “inside or relationship”, “Moto” means “origin or foundation”.

All these things fit the person who created a movement and a sophisticated algorithm. The problem is, however, that every single word can have several meanings.

So there is no certainty that Satoshi Nakamoto is Japanese. For simplicity, Satoshi Nakamoto is hereinafter referred to as with the male sex, although he could also be female or a group of several persons.

Does anyone know who Satoshi Nakamoto was?

New Yorker Joshua Davis believes Satoshi Nakamoto is a cryptography student at Dublin Trinity College called Michael Clear. He came to his conclusion through an analysis of all Nakamoto letters containing more than 80,000 words. In it he searched for linguistic references to Nakamoto’s identity. However, he also suspected the Finnish economic sociologist and former game developer Vili Lehdonvirta. However, both have stated that they are not the inventors of Bitcoin. In a web summit in 2013, Michael Clear even publicly stated that he was not Satoshi Nakamoto.

Adam Penenberg of FastCompany denied the suspicion and said Satoshi Nakamoto was an association of three people: Neal King, Vladimir Oksman, and Charles Bry. He proved that he entered various sentences from the published white paper into Google to check whether these word phrases had already been found somewhere before. It turned out later that one of the three was named in a patent application for updating and distributing cryptic keys. The Bitcoin.org domain that Satoshi Nakamoto used to publish the white paper was registered only three days after that same patent application. According to Penenberg, the domain is said to have been registered in Finland and one of the patent applicants had travelled to the country six months earlier. All three suspects, however, deny being Satoshi Nakamoto.

However, the Bitcoin.org domain was registered on August 18, 2008 by an anonymous Japanese service provider and a Japanese ISP. After that, the domain should only have been transferred to Finland. This somewhat invalidates the Finland theory.

Others claim that the inventor of Bitcoin could also be Martii Malmi. Martii lives in Finland and has been involved in the development of Bitcoin since its birth.

Jed McCaleb is also a suspect. He is known as a lover of Japanese culture and lives in Japan. At the same time, he is founder of the controversial Bitcoin exchange Mt Gox and co-founder of the decentralized payment systems Ripple and Stellar.

There are many more potential Satoshi Nakamotos, including Donal O’Mahony, Michael Peirce, Professor Shinichi Mochizuki and Dorian S. Nakamoto. All deny, however, to be the inventors of an ingenious invention. The Bitcoin community therefore remains uncertain about Satoshi Nakamoto’s identity.

What do they know about Satoshi Nakamoto?

Based on interviews with Satoshi Nakamoto’s companions from the early hours of Bitcoin’s birth, he is said to have carefully thought through the system. According to Jeff Garzik, his encodings did not bear the handwriting of a conventional software engineer.

How rich is he?

According to an analysis by bitcoiner Sergio Lerner, Satoshi Nakamoto is said to have mined many of the first blocks in the Bitcoin network, a total of about one million bitcoins. At the current exchange rate in July 2017, this corresponds to more than two billion US dollars.

What are Soft and Hard Fork?

A fork is the classic development of open source software. Since open source software is of course freely accessible and downloadable by everyone, everyone has the possibility to make their own copy of the software and to modify it for their own purposes. That would have forced the software.

Modifying the software is by no means a malicious intervention, but even an elementary and desirable part of open source projects. Users with programming knowledge can add new functionalities according to their own needs – so different distributions of a software can exist.

What do forks have to do with blockchains?

Starting from a public blockchain like that of the bitcoin, it is ultimately based on open source code that can be modified locally by developers as described above. However, it is essential with blockchain technologies that the network participants agree on certain points. So it would be problematic if some miners in the network use e.g. the SHA-256 hash function and other network participants use a different hash function. After all, you don’t just want to write transactions in your own “household book”, but to carry them out in such a way that they are recognized by as many network participants as possible.

In practice, this is as follows:

  • There is a generally accepted Bitcoin version.
  • Users want new functionalities, e.g. an increase in the block size to solve capacity problems.
  • Any user copies the current Bitcoin software and modifies it with a higher block size.
  • He makes the software available to other users, who can also use it.
  • Now there are two versions of Bitcoin software on the network and users can decide which one to use.

But attention: It is important to differentiate between blockchain forks and forks of software. While forks are used in the latter case to develop new or additional services based on existing ones, forks in the blockchain context rather aim to represent an alternative.

Forks must be classified in particular in terms of their effect on the existing software or on the blockchain network:

Types of Forks

To understand the explanations, you should know what Nodes is all about. Briefly explained, the nodes store the blockchain as network nodes and make it available to the network. In the best case, the current consensus of the blockchain, i.e. the most current transaction history, is stored decentrally on all nodes.

All nodes in the network must be operated with compatible software so that they can communicate on a blockchain. If an amendment proposal is submitted, there are two ways to carry out the fork:

Soft Fork

A Soft Fork is characterized by its backwards compatibility. So there may be nodes in the network that work with the new software. This does not lead to compatibility problems: The nodes with the old software also accept the opinions of the users who have now opted for the new software. On the other hand, users want to establish their standard with the new software and therefore rely on their new method for all blocks.

As soon as the majority in the network is reached, all nodes agree on the new blocks.

Hard fork

This type of fork is not backward compatible – and therefore brings special challenges to guarantee consensus in the network. Existing nodes would have to update their software in order to take the new blocks into account (with the Soft Fork, the existing nodes could simply take the new blocks into account due to their compatibility). The incompatibility of the versions leads to the fact that the network can be split to a certain extent: Users who are in favour of or against acceptance of the changes will then operate on different block chains. This is called a blockchain fork (not comparable to a software fork). It is important to emphasize that a new, stable blockchain is not formed with every hard fork. Ethereum now has five Hard Forks behind it and only one of them has formed a new blockchain with Ethereum Classic.

How is a fork performed?

Let’s have a look at a fork like Bitcoin. The Bitcoin Core Team may be able to suggest changes – but not enforce them alone. In the end, the miners decide which blockchain they follow. This ensures decentralisation, as the network is also left the decision-making authority here. The Core Team can certainly push ahead with further developments – but it has to pitch again and again before the miners and hope for acceptance.

In the past, Ethereum and Ethereum Classic have indeed been a decisive split in the Ethereum Blockchain: After the DAO hack, the community intensively discussed reversing the transfer of the hacked coins by agreeing on a blockchain that does not include this transfer. Of course, option A) hackers may keep their loot with option B) action of the hacker will be reversed incompatible. The procedure therefore requires a hard fork. And as long as 100% of the participants do not agree on a version, the blockchain is split. This happened because there are now two Ethereum blockchains: Ethereum Classic (without hard fork: the hacker remains in possession of the stolen coins) and Ethereum (with hard fork: unwanted transaction was undone).

Miner Activated fork

In this case, the miners in the network decide whether a fork is performed. You signal that you want to perform the fork by appending this information to confirmed blocks. If within the last 1000 blocks a sufficient amount of miners has signalled the fork, the changes are enforced. For example, the new version is valid from 75% approval, from 95% even old blocks that are not marked with the new version are rejected.

User Activated Soft Fork (UASF)

The User Activated Soft Fork (UASF) is a fork that is brought about by a majority decision among the full nodes. It is scheduled to a certain date on which the majority of the full nodes must agree in order for the fork to actually take place.

Miner Activated Soft Fork (MASF)

With a Miner Activated Soft Fork (MASF), the miners decide on the fork with their computing power as voting rights and initiate it. This makes the process more efficient, as the full nodes can accept the changes afterwards. However, MASF involves risks because the network relies on computing power as a benchmark. For example, the computing power can tell you that the soft fork is taking place, but the miners actually continue to work with the old version without the soft fork.

What is a 51% attack and how does it work?

Like any other system, Bitcoin is not perfect. In the context of possible risks, there is often talk of a so-called 51% attack. This tutorial will explain what such an attack is, what it can do and how to prevent it.

Be your own bank is one of the most famous slogans of the Bitcoin community. But such a claim is neglected that a possible decentralisation of the banking system is accompanied by a massive decentralisation of responsibility. Accordingly, decentralization requires enlightened and critical users who are aware of the dangers of possible attacks on the blockchain. One of the most frequently discussed dangers is often a so-called 51% attack.

How does a 51% attack work?

The Bitcoin infrastructure consists of the users (more precisely their wallets), different user interfaces, the miners and the nodes. The nodes are responsible for maintaining the Bitcoin network and managing transaction traffic. Nodes guarantee that all transactions comply with the rules. The task of the Miner is to combine transactions into blocks and append them to the block chain.

In the notorious 51% attack, the following scenario occurs: an attacker succeeds in setting over 50% of the miners. If you take a look at blockchain.info, you can see that three of the large mining pools (Antpool, F2Pool and Btcc Pool) currently have more than 50% of the hashrate – so the concern is not purely hypothetical, but quite real. Other altcoins have had such attacks in the past.

So what could happen if an attacker puts over 50% of the miners? To clarify this, a look at Satoshi Nakamoto’s white paper: in section 11 he looks at the problem of an attacker who wants to feed wrong blocks into the system. Finally, you can calculate how likely it is that an attacker enforces his blockchain.

The figures above show the probability of success, on the left depending on the relative hash rate of the attacker (assuming six confirmations of a transaction) and on the right depending on the number of transactions (assuming a relative hash rate of 26% on the attacker’s side).

It is easy to see that if the attacker’s hashrate is greater than or equal to that of the opponent, the probability of changing things is one. This means that someone with more than 50% of the hashrate on his side would have incredible power. The above formula would then always be decided in his favour. You should also keep in mind: even if the attack is called 51% attack and suggests that you need more than fifty percent of the hashrate for the attack, you can see from the formula of Nakamoto that with less control the probability for the success of an attack is smaller, but success is also not excluded. Accordingly, such an attack may also be successful with significantly less than 51% of the hashrate.

Possibilities of the 51% attack – what an attacker could do

As long as the attacker has control, he could perform double-spending transactions. This means that it could reverse transactions and transfer them elsewhere, messing up the bitcoin ecosystem completely. It could prevent any number of transactions or not assure them of confirmations. The attacker could, for example, specifically block certain payments and thus switch off individual participants. It could prevent any number of miners from mining any valid blocks and instead collect the rewards themselves. The examples show: the potential damage that such an attack can do is immense. Accordingly, the danger of such an attack should be taken very seriously.

What can we do about it?

The advantage of the blockchain is that everything is transparent and can be observed by everyone. On Blockchain.info you can see which mining pools have found which blocks. This is not an antidote, of course, but it can help to see if there are any mining pools that significantly often contribute a block of blockchain.

Apart from that, however, in the case of Bitcoin it is difficult to do something about such an attack as an individual. However, if such an attack occurs, it is advisable for each user to increase the confirmations of a transaction to prevent duplicate transactions. If an attacker really had 50% or more of the hashrate, this would not change the fact that the blockchain version of the attacker would always prevail, but it would take important time. Time that is valuable because it is incredibly expensive at Bitcoin to maintain 51% of the hashrate.

From Gavin Andersen’s point of view, who coined the bon mot “That would be bad” with a view to a 51% attack, it is relatively easy to defend against such an attack from the developer’s point of view. One idea would be that the attacker would have to have not only a lot of hashrates but also a lot of bitcoins from the time before the attack (see here). Overall, this would not only make the 51% attack quite expensive, but also ensure that the attacker bleeds out quickly.

In summary, a 51% attack on bitcoin is a serious matter, but one that can be uncovered. Especially in the field of prevention, Bitcoin users have an important task: it is up to them to keep an eye on the entire network at all times.

What is Ripple and XRP?

Ripple is a distributed real-time protocol for many types of payments of all kinds. We explain the role of the project, which calls itself “Internet of Value”, for payment service providers, banks and end customers.

Ripple: No further bitcoin
First of all, Ripple can be clearly classified as an enterprise project and thus be clearly distinguished from Bitcoin. While the latter currency is used by the end customers themselves for payment transfer, Ripple is a technology that runs in the background – users themselves do not necessarily notice that they are using Ripple indirectly. Instead, the project is aimed at large institutions such as payment service providers, financial institutions and banks.

Any kind of values can be transmitted over the network. The log also contains a component that allows the exchange of different currencies. The universality of the protocol even allows you to exchange airline bonus miles for bitcoin, i.e. much more than just crypto currencies per se. Each network participant can submit bids or offers; Ripple then routes these requests in the network in such a way that the exchange takes place as cost-effectively as possible.

Payment processing in the enterprise context
Ripple has a special infrastructure that allows 1,500 transactions per second. This means that the transaction capacity that can be processed by the network is significantly higher than that of Bitcoin and many other known blockchain projects, for example.

The technology behind Ripple
As already mentioned, it is possible to exchange currencies of different types in the Ripple network. This function is built in by default.

However, such a transaction requires trust between the parties. If Bob wants to send Bitcoin to Alice, he does not necessarily need to own Bitcoin, but can also carry out the transaction in US dollars. In addition, another party comes into play, the Gateway, which takes over this role of trust between Alice and Bob.

To understand how such a gateway works, we look at the following simple transactions on a Euro basis. The gateway can also be imagined as a person who is an intermediary between sender and receiver.

  • A common transaction
    We assume that Bob wants to send 100€ to Jonas. The transaction looks like “usual” from the outside, i.e. Bob sends the 100€ directly to Jonas.

  • Transaction with intermediaries
    We now assume that both the receiver and the sender have an agent. The latter takes over the transfer. This means that Bob does not send the money directly to Jonas, but gives it to his agent Kate, who is responsible for the transfer, and Jonas does not receive his money directly from Bob’s agent, but also through his agent Alice.

This means that liabilities also arise between the agents. Because it’s not Bob, it’s Kate who owes Alice the money. Alice releases the money for Jonas and at the end of the transaction a liability arises, so that Kate owes Alice €100.

  • Multiple transactions in the network
    Let us now go one step further and to the last extension of our example. We assume that there are two transactions in the network:

First, the €100 transaction from Bob to Jonas. This transaction takes place using the agents Kate -> Alice (see transaction 1 on the screen).

Second, the transaction in the amount of 100€ from Ela to Anna (graphically seen in the opposite direction of the first transaction). This transaction takes place using the agents Alice -> Kate (see transaction 1 on the screen).

Ultimately, this means that the debt balance between the individual gateways balances out again.

The example used here is of course very simplified and the technical process behind a ripple transaction is much more complicated, yet it shows the interaction of the individual gateways.

If a transaction is carried out that requires a currency change, several gateways can simply be connected in series, as here, which take over the exchange and connect the sender and receiver with each other. This allows Alice to send US dollars, even if he wishes Alice Bitcoin to receive them. The task of the Ripple network is to route these requests through the network as cheaply as possible. Users pay a fee for carrying out the transactions, but no one collects this fee. Instead, the XRP tokens are destroyed – these costs for each type of transaction are designed to prevent network spam.

The Ripple Governance
XRP is regarded as the token of the project, which also takes on the role of currency exchange. The project itself is also decentralised and uses decentralised technologies to carry out the transactions.

Nevertheless, there is harsh criticism of the Ripple model, as most of the tokens are in the hands of the Ripple team. There are 100 billion tokens in total, 61.4 billion of which belong to the team. In fact, it even has the absolute majority of tokens – a reason for many block chain experts not to name Ripple as a truly decentralized project.

It is noticeable that the team is trying to find a solution to the centralization problem. A decentralisation strategy was published in May 2017. In July 2017, the number of validators for the XRP ledgers was increased (to a total of 55). The number of nodes operated by Ripple itself is to be reduced at the same time.

ETH Classic defuses difficulty bomb

The Ethereum Classic Project (ETC) recently defused the difficulty bomb. Ethereum Classic is thus further away from its younger brother Ethereum. What’s the deal with this bomb and the decision to disarm it?

The radical origin of Ethereum Classic

The year is 2016, Ethereum is already making waves in the crypto world and preparing for the DAO. At first everything looks good, but then a hack stands out. Panic is spreading in the markets. The Ethereum Foundation acts quickly and wants to undo the hack to save investors’ trust.

On July 20, 2016, just over a month after the attack on the DAO, a non-reverse compatible update will be installed in the Ethereum network – a hard fork. The champagne corks are already popping all over the world when it suddenly becomes clear that the old blockchain is being mined further. Instead of all participants being on the updated chain, there are some rebels who want to live in a different reality under the slogan “Code is Law”. A reality in which the Ethereum Foundation does not have the power to turn back time and change laws.

That was the split between Ethereum and Ethereum Classic. Even then it was all about a radical difference of opinion: “Is computer code a fixed law in the blockchain world or changeable?” The ETC representatives were happy to pay the price of the DAO hack for their conviction.

The Proof of Stake and the Difficulty Bomb

With the launch of Ethereum, the idea of the Proof of Stake (POS) was born. First, Ethereum should run with Proof of Work (POW) until the details of the Proof of Stake have been worked out. ETH is still in this phase and preparing for the POS. However, ETC has now decided to stick with the proof of work. The main reason for this is the decentralization that the POW brings.

The so-called difficulty bomb was originally built into the Ethereum protocol to move the miners from POW to POS. If it were lit, the difficulty of proof of work would double after each new block.

However, Ethereum Classic had already put the bomb on ice with the so-called “Diehard Upgrade”. Now the bomb has been finally defused and the decision has been made that ETC will remain with the proof of work.

The corresponding software for this hard fork has already been released three months in advance. The ETC community has also discussed this decision in detail. So this is not a night and fog action, but a well-considered and planned software update.

Ethereum Classic vs. Ethereum?

As a result, ETC and ETH are developing further and further apart. Both projects have the same origin, but similar to BTC and BCH there are different views on the future of the Protocol.

The ingenious thing about the blockchain technology comes out: instead of having to choose one or the other, enthusiasts can simply use both systems. ETH can prove in the future whether the Proof of Stake works.

What is OmiseGO?

OmiseGO (OMG) is a system for money transfer of Southeast Asian origin. It is based on Ethereum’s technology and tries to offer private individuals and institutions a platform for transactions without having to resort to central intermediaries.

In addition to Jun Hasegawa as founder of OmiseGO and CEO of Omise, Vitalik Buterin (founder of Ethereum), Gawin Wood (co-founder of Ethereum), Joseph Poon (the creator of the Bitcoin Lightning Network) and Julian Zawistowski (founder of Golem) are direct founding members or advisors of OmiseGO. The young startup is supported and further developed by top-class developers from the blockchain area, which makes the ambitious goals appear quite realistic.

OmiseGO became well known through the ICO (initial coin offering) that took place in June 2017. This ICO issued 140 million OMG tokens for over $35 million. Shortly afterwards, the value per token rose to over 7 euros – an exponential jump of over 300%.

Omise – The company behind OmiseGO

Omise intends to use OmiseGO as its central payment system in the near future, enabling millions of people to make quick and cost-effective transactions with both Fiat currencies (euros, dollars, etc.) and crypto currencies. This would give people who currently have no access to banking services a much more efficient account than local financial institutions can currently offer. Omise is characterised by dynamic development and numerous partnerships (including with McDonalds Thailand, Alipay and Korea’s largest credit card provider: Shinhan Card Co.). That’s why Forbes magazine named Omise “Fintech Rockstar”. OmiseGO’s slogan is “unbank the banked”.

How does OmiseGO work?
OmiseGO has two basic functions: the gateway between different blockchains and the wallet with integrated decentralized exchange (DEX). By combining the two products, OmiseGO offers an efficient, decentralized wallet for different Fiat currencies, crypto currencies and possibly additional assets in the future. These can then be traded easily, quickly and cost-effectively within the Wallet. Among other things, the OmiseGO Payment Gateway makes it possible to pay anywhere in the world in the currency of your choice. OmiseGO automatically converts to the target currency.

OmiseGO currently works through the Ethereum Blockchain, but in the future OmiseGO will receive its own Blockchain (Proof of Stake based). OmiseGO will also be the first project to use Ethereum’s planned “Plasma” infrastructure upgrade. Plasma is an upgrade for Ethereum, which allows significantly more transactions on the Ethereum blockchain. This could enable OmiseGO to process millions of transactions per second cost-effectively in the near future.

OmiseGO also provides numerous other functions. For example, checking the account or custody account balance up to transactions between different currency areas.

Goals of OmiseGO
Technically, OmiseGO is an Ethereum fork and implements its functions as Smart Contracts on the Ethereum blockchain. The own OmiseGO Blockchain is currently under development. On the one hand, OmiseGO wants to ensure that the approximately two billion people worldwide have this access without access to a bank account and on the other hand that all Fiat currencies, crypto currencies and assets can be stored compactly and traded cost-effectively in a single wallet. OmiseGO is currently working on a Software Development Kit (SDK) for developers that will enable any platform to implement OmiseGO. This could multiply the number of potential users. The SDK is scheduled for release in 2018.

OmiseGO will be one of the first Ethereum-based projects that uses plasma and will be able to process millions of transactions per second.