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Happy Bitcoin Bitcoin Pizza Day!

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May 22, 2010 marks the 10th anniversary of the first Bitcoin transaction, in which a Florida man paid for two pizzas with the Bitcoin. The day has become part of folklore, not because of the transaction, but more the price: Laszlo Hanyecz paid 10,000 Bitcoins for two Papa John’s pizzas.

In a recent interview, he said pizzas were delicious and that he does not regret anything. 10,000 $BTC is now worth around $92 Million USD.

Organized on bitcointalk forum, the Florida man reached out for help. “I’ll pay 10,000 bitcoins for a couple of pizzas.. like maybe 2 large ones so I have some left over for the next day,” Hanyecz wrote.

“I like having left over pizza to nibble on later. You can make the pizza yourself and bring it to my house or order it for me from a delivery place, but what I’m aiming for is getting food delivered in exchange for bitcoins where I don’t have to order or prepare it myself, kind of like ordering a ‘breakfast platter’ at a hotel or something, they just bring you something to eat and you’re happy!”

A British man took up Hanyecz’s offer and bought the two pizzas for him in exchange for the 10,000 Bitcoins. Even then the recipient of the Bitcoins got himself a bargain, paying $25 for the pizzas, while 10,000 Bitcoins were worth around $41 at the time. 

Despite the astronomical rise in the price of Bitcoin it seems Hanyecz is not phased about his deal. “It wasn’t like Bitcoins had any value back then, so the idea of trading them for a pizza was incredibly cool,” Hanyecz told the NY Times. 

Facebook announces Libra cryptocurrency: It’s not a cryptocurrency

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Facebook Libra

Facebook has revealed the details of its cryptocurrency, Libra, which will let you buy things or send money to people with nearly zero fees. You’ll pseudonymously buy or cash out your Libra online or at local exchange points like grocery stores, and spend it using interoperable third-party wallet apps or Facebook’s own Calibra wallet that will be built into WhatsApp, Messenger and its own app. Today Facebook released its white paper explaining Libra and its testnet for working out the kinks of its blockchain system before a public launch in the first half of 2020. If the idea of Facebook and it’s partner companies having even more information on you… you should be.

Libra, will run on a blockchain network secured at launch by 100 distributed computer servers, or nodes. Twenty-eight node-running members are currently on board.

The Libra blockchain will go live in 2020, with the Libra Association – a Switzerland-based non-profit – tasked with leading the cryptocurrency’s ongoing development. In a white paper released Tuesday, the organization detailed how the Libra blockchain will be Byzantine fault-tolerant, meaning faulty behavior by some of the actors in the network will not compromise the security of the broader network.

It states:

“[The Libra blockchain makes] it extraordinarily difficult for an attacker to compromise 33 separately run nodes that would be required to launch an attack against the system.”

Facebook is launching a subsidiary company also called Calibra that handles its crypto dealings and protects users’ privacy by never mingling your Libra payments with your Facebook data so it can’t be used for ad targeting. Your real identity won’t be tied to your publicly visible transactions. But Facebook/Calibra and other founding members of the Libra Association will earn interest on the money users cash in that is held in reserve to keep the value of Libra stable.

Facebook plans to develop Libra into a “global coin”, pegging it to “well-known currencies” such as the US dollar and British pound in a bid to prevent the “wild swings” of conventional cryptocurrencies such as bitcoin and Ethereum. This is one of the first red flags. This is less a cryptocurrency than it is an attempt at a stablecoin. As such… it isn’t even really moving into the cryptocurrency space but more the space of fiat banking.

If you’re wondering about Libra’s implications on the future of payments: stop it because Joshua Davis has it all figured out.

Facebook won’t fully control Libra, but instead get just a single vote in its governance like other founding members of the Libra Association, including Visa, Uber, and Andreessen Horowitz, which have invested at least $10 million each into the project’s operations. The association will promote the open-sourced Libra Blockchain and developer platform with its own Move programming language, plus sign up businesses to accept Libra for payment and even give customers discounts or rewards.

So yeah… this will all be tied together and of course, since Facebook really is a data company you can assume that your purchases will help inform companies in order to be able to target you (even if indirectly).

Early bitcoin core developer Peter Todd, a well-known industry figure and an applied cryptography consultant, and outspoken Bitcoin maximalist didn’t mince his words.

Libra runs on a permissioned blockchain, which means that only companies in the Libra Association can mine it/control it. After five years they say they will transition to a permissionless chain. Except… no blockchain has ever moved from permissioned to permissionless. Also… anybody familiar with Facebook’s constantly moving permissions on the social platform? Yeah. It’s nothing more than a private global federal bank.

The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible. – Satoshi Nakamoto

What Facebook, or any company like Facebook, is proposing is not a cryptocurrency. It doesn’t have any of the fundamental characteristics of cryptocurrency. It doesn’t stand on the five pillars of an open blockchain. In fact, it has none of those. –Andreas M. AntonopoulosThe five pillars: open, public, neutral, censorship-resistant, and borderless.

Libra:

  • Open… naw, total opposite. Highly centralized. It costs $10 million USD to be a node.
  • Public? Nope… Run by an organization that paid $10m a pop to be included.
  • Neutral – No way… how could it be? It’s backed by multiple, government created, fiat currencies. To build on many features of Libra’s blockchain, developers must seek permission from Facebook and its partners who administer it.
  • Censorship-resistant – again, nope. Its chain isn’t even… see above… to build on many features of Libra’s blockchain, developers must seek permission from Facebook and its partners who administer it.
  • Borderless – Can you use Facebook in China? Messenger? Whatsapp? or would you simply do like the majority of Chinese and use WeChat and Renren? They use those for a reason after all.

What they are building might be more akin to a better version of PayPal. They will also share info with government authorities – they’ve not said which ones but how can they be borderless, censorship-resistant, neutral, etc. AND comply with an individual nation-state at the same time?

Major companies are accepting cryptocurrencies

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An under the radar thing is taking place… major companies are accepting crypto in their retail stores through an app called Spedn. Companies like Barnes & Noble, Baskin Robbins, Bed Bath & Beyond, Caribou Coffee, Crate and Barrel, Express, GameStop, Jamba Juice, Lowe’s, Nordstrom, Office Depot & OfficeMax, Petco, Regal Cinemas, Ulta Beauty, Amazon-owned Whole Foods Market, and Starbucks. In total, nearly 100 stores are expected to start accepting bitcoin and the other cryptocurrencies via the Spedn app by the end of this year.

This is a huge deal for early adopters and a bigger deal for retailers who will be using it. Why? For one, cryptocurrency transactions are permanent. So this removes chargeback disputes that the retailer has to worry about.
Consulting firm Javelin Strategy estimates that chargebacks cost merchants $31 billion in 2017.

Crypto will also upend the fees of the existing payment industry. To give an idea of what’s at stake, $5.93 trillion in traditional credit card payments resulted in $88.39 billion in fees in the U.S. alone, according to a 2017 Nilson report. Average interchange fees in 2017 ranged between $0.22 and $0.52 depending on the transaction value and the percent fee. A larger transaction could end up costing significantly more. With crypto… it’s currently around $0.04 USD. As new technologies like the Lightning Network, Liquid Sidechain, etc. these could go even lower.

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Happy tenth anniversary of the Bitcoin genesis block

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Jan 3rd is the 10th birthday of the Bitcoin genesis block. On that day, the Times led with “Chancellor on brink of second bailout for banks” amid fallout from the 2008 financial crisis, something which in the UK consumers referred to as the ‘Credit Crunch.’ A decade later, the headline reads “Universities face fresh credit crunch as debt spiral.”

The genesis block contains the first 50 BTC block reward mined by Satoshi Nakamoto and was designed so that it can never be spent (all other mining rewards attributed to Satoshi still hasn’t been touched). Satoshi believed the old model of monetary philosophy was failing, so he built a new one without all of the controls and hazards that can lead to the debasement of fiat currencies with reckless printing practices.


His intent is covertly coded into the genesis block. Embedded in the hexadecimal code on the genesis block’s coinbase, the message, after being decoded from hex, reads as follows: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”


The message is a direct allusion to the headline for The Times the day Bitcoin launched. As the article details, Alistair Darling, the U.K.’s Chancellor of the Exchequer at the time, was debating a second bailout for U.K. banks. This capital infusion would come nearly a year after the government flushed the same banks in an attempt to ballast credit flow and stanch impending economic downturn, something the United States did for its own banks in October of 2008.


The rest is obviously history.

The Lightning Network just hit 500 BTC in network capacity

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The Lightning Network adds another layer to Bitcoin’s blockchain and enables users to create payment channels between any two parties on that extra layer. These channels can exist for as long as required, and because they’re set up between two people, transactions will be almost instant and the fees will be extremely low or even non-existent.

How it Works

The Lightning Network is dependent upon the underlying technology of the blockchain. By using real Bitcoin/blockchain transactions and using its native smart-contract scripting language, it is possible to create a secure network of participants which are able to transact at high volume and high speed.

Bidirectional Payment Channels. Two participants create a ledger entry on the blockchain which requires both participants to sign off on any spending of funds. Both parties create transactions which refund the ledger entry to their individual allocation, but do not broadcast them to the blockchain. They can update their individual allocations for the ledger entry by creating many transactions spending from the current ledger entry output. Only the most recent version is valid, which is enforced by blockchain-parsable smart-contract scripting. This entry can be closed out at any time by either party without any trust or custodianship by broadcasting the most recent version to the blockchain.

Lightning Network. By creating a network of these two-party ledger entries, it is possible to find a path across the network similar to routing packets on the internet. The nodes along the path are not trusted, as the payment is enforced using a script which enforces the atomicity (either the entire payment succeeds or fails) via decrementing time-locks.

Blockchain as Arbiter. As a result, it is possible to conduct transactions off-blockchain without limitations. Transactions can be made off-chain with confidence of on-blockchain enforceability. This is similar to how one makes many legal contracts with others, but one does not go to court every time a contract is made. By making the transactions and scripts parsable, the smart-contract can be enforced on-blockchain. Only in the event of non-cooperation is the court involved – but with the blockchain, the result is deterministic.