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What’s Worrying/Exciting about Bitcoin in 2017



Looking forward into the next year and more of bitcoin, I see three main areas of concern, each related to the other. Let’s look at the problems, and the work going on to solve them.

  • Fungibility
  • Centralization
  • Scalability

Fungibility: Protecting Your Privacy

Fungibility technically means all coins are substitutable, but in practice it means that you can spend your bitcoins how you want. That means that nobody has the power to stop your transaction (see: Centralization), and nobody has reason not to accept your coins.

The state of fungibility in bitcoin today is poor. Services exist which aim to trace where bitcoins came from and whose they are. The fact that coins can be traced means some services are obliged to do so, and they refuse to interact with coins they see as “tainted”.

The simplest weakness of fungibility is the public ledger: everyone can try to analyze payments to see where they went. Consider transaction 3d96bcd… from April 8th 2016; one output is 3.10510875 BTC, the other is 0.05934611 BTC. If we convert them using the USD closing rate from April 7th, that’s $1307.8842 and $24.9968. It’s fair to guess that the second output is a $25 payment, and the first output is back to the payer. I’d also guess the payer is in the United States.

Addresses naturally cluster when a wallet has to use more than one input to create a transaction; when public addresses are revealed (particularly with address reuse!), analysis becomes easier. I asked someone to look at my bitcoin address, and he immediately linked me to using such techniques.

Different software creates slightly different transactions, which can also be used to link transactions and thus addresses. Differences in fee estimation is another method. And every transaction you know makes it easier to guess the remaining transactions, like solving a crossword puzzle. Fungibility is a network property: other people having it helps you have it, too.

There are also active probes going on; fake bitcoin nodes which connect to as many other nodes as they can, presumably to try to nail down the original source of transactions.

What’s Being Done For Fungiblity

Software is slowly improving: every bitcoin core release changelog seems to include tweaks to make active snooping more difficult.

We may see more uniformity in wallet implementations, too, though in the short term things like replace-by-fee will probably make wallets more different, not less.

The most promising development here is TumbleBit: it’s a tumbler which you don’t need to trust with your coins or your privacy. A normal tumbler is where I take everyone’s coins, and then return them randomly. Of course, I might decide to not return them, or keep records so I can trace whose coins went where. TumbleBit is more complicated, but doesn’t have either of these problems. It’s in early development, but once it’s complete I look forward to quite a few TumbleBit servers mudding the waters.

Centralization: Control of The Network

If the miners refuse to mine your transactions, your bitcoins aren’t worth anything. With better fungibility that becomes unlikely, but still possible (miners could insist on ID for every transaction, for example).

In most systems, there are economies of scale which drive centralization, and bitcoin mining is no exception. The invention of mining pools dramatically increased centralization, as small miners delegated their transaction selection to a handful of pools (this smooths out a miners income, by profit sharing). As block sizes increased, the situation became worse: if your block is slow to get out to the other miners, it’s likely to lose a race, and if you’re slow to get blocks from other miners, you’re more likely to produce obsolete blocks. Blocks which lose out like this are called “orphan blocks”, and how often you produce them is your “orphan rate”. More than 1% and your profitability is probably shot.

You can drop your orphan rate by being the biggest miner (or, part of the biggest pool). If a single miner or pool gets more than 50% (which has happened), they can reliably censor the network (which hasn’t). With even less they can still profitably exploit vendors who accept unconfirmed transactions (which has happened). And it turns out that larger miners can drive up orphan rates of other miners (so-called selfish mining) and magnify their advantage.

It should be no surprise then that mining is fairly centralized: four groups control more than half the mining power. Fortunately, there doesn’t seem to be deliberate orphaning attacks happening.

The other issue is that fear of orphaning leads to miners mining empty blocks (aka SPV mining). They do this because they watch other mining pools, and as soon as they see a block header which refers a new previous block, they start mining an empty block themselves. They have to mine an empty block, because they don’t know what transactions were in the previous block. That doesn’t help the network throughput at all, and because they are not validating the previous block, it greatly weakens the security of lightweight nodes which assume miners are actually checking blocks. It turns out over 50% of mining power was doing this in 2015, and many still are.

What’s Being Done For Centralization

Fast block propagation was a big area of work last year, with Bitcoin Unlimited’s XTHIN and Bitcoin Core’s Compact Block work. Both send short summaries of the block contents which often allow a node (which usually knows all the transactions already, just not which ones are in this block) to reconstruct it.

Matt Corallo previously ran the Bitcoin Relay Network to try to increase propagation and reduce incentive to SPV mine; the latest version is based on compact blocks and is even more efficient, called Bitcoin Fibre. You’re welcome to run your own Fibre network, too (I run a test one on Digital Ocean, for example). It uses UDP and error correction so you can get blocks from multiple sources at once, and handle packet loss. Matt claims that there’s no point in SPV mining any more; Fibre gets you the blocks just as fast.

There’s ongoing work on speeding up new block creation further: I’m told Bitcoin Unlimited removed the validity double-check on newly created blocks (it’s caught issues in the past, but maybe it’s time) and Bitcoin Core has worked on speeding it up so it’s no longer measurable. Combined with more significant fee income (which is lost when SPV mining), we may see SPV mining eliminated this year.

None of these addresses the core problem of centralization; this is the issue we have fewest technical fixes for and thus is likely to be least amenable to technical efforts.

Nontheless, Roger Ver’s mining pool gives me hope that we’ll see some diversity in motivations for miners. Making life easier and more convenient for small miners (especially solo mining) should be a priority for those who care about centralization. In the long term, as more businesses become dependent on bitcoin, I’d like them to start investing in mining capacity as a kind of distributed insurance policy.

Scalability: More Transactions

In the early days, bitcoin software had a 100k block limit and no transaction fees were required. Nobody cared, and blocks were never full.

When blocks passed 700k, bitcoin saw its first centralization crisis as orphan rates spiked and one pool ( got over 50% of the hash power. Since then developers have scrambled over the issue of block propagation; in theory, it could be independent of block size, but in practice it’s not. Centralization has remained a core source of tension with hopes for enlarging blocksize. Blocks are now full (though only 85% of theoretical maximum), and the transition from “free” to “user pays” is causing pain as software has to be upgraded and users proceed through the stages of mourning on free transactions (disbelief, denial, bargaining, guilt, anger, depression, and acceptance).

But other scalability issues exist: the bitcoin history has reached 100GB (that’s a lot of work for starting a new node), the size of unspent outputs each node has to remember keeps expanding (it must remember these forever), and the number of full nodes in the network is in long-term decline (though currently flat).

What’s Being Done For Scalability

There are several “20% improvement” factors on the horizon, and together they multiply to give significant improvements in scalability as software improves. Rising fees are causing wallet authors to (finally!) begin optimizing their transactions, because users are noticing.

Block propagation has gotten better (see centralization above) and slightly less coupled to blocksize, and validation has gotten much faster (thanks much to libsecp256k1) which may see us close the gap between the theoretical 1MB blocksize and the current 850k average blocksize.

Segregated Witness should increase blocks to about 2MB, though it depends how quickly the ecosystem (wallets and other transaction businesses) start using it.

Segregated witness makes signatures (aka “witnesses”) discardable, and gives them a discount over parts of transactions which must be kept (ie. unspent outputs). This should bias wallets towards using it so more of the blocks can be discarded by nodes.

Replace-by-fee is becoming more common: this allows you to bump the fee on transactions which are taking too long to confirm. This not only means you can be more aggressive on lowering fees, it also allows you to combine multiple payments into one if you have them, which reduces your total transaction size.

On the horizon are Schnorr signatures, which can be combined together, reducing witness size even further: instead of a transaction with two inputs which are each a 33 byte key and 72 byte signature, we might have two 33 byte keys, and a single signature. Interestingly, this also provides an incentive to adopt mixing protocols (like TumbleBit) because they are smaller and hence cheaper, helping the network fungibility even if you don’t care about fungibility yourself.

Finally, there are at two significant efforts to create off-chain scaling for bitcoins; Lightning for microtransactions, and the proposed sidechain MimbleWimble. Lightning takes Satoshi’s original (but incomplete) ideas for payment channels on top of bitcoin and makes them bi-directional and trustless, and forms them into a network. There are at least four teams of us actively working on implementing it. MimbleWimble is more radical, and uses a cut-down scriptless bitcoin with some amazing math to produce a blockchain which doesn’t require transmission or storage of any historical state, just the current unspent outputs, without loss of security (but with great fungibility benefits). Implemented as a sidechain, you would move bitcoins across to it, then back. It has cast its spell on Andrew Poelstra and I look forward to seeing an alpha release this year.


It’s often hard to find an overview of all the different threads of development and effort going on at once in the bitcoin technical community. I haven’t even covered more speculative things like Bitcoin-NG or Confidential Transactions nor developments which don’t directly address these three areas such as covenants or new scripting enhancements, let alone things which will no doubt be dropped from the sky

But hopefully this gives you a list of things I’m looking forward to in 2017!

About the Author 

This article was written by Rusty Russell. Rusty is a Linux kernel dev who wandered into Blockstream, and is currently trying to produce a prototype and spec for bitcoin lightning.


Women on Top in Tech – Dr. Sanna Gaspard, Founder and CEO of Rubitection



(Women on Top in Tech is a series about Women Founders, CEOs, and Leaders in technology. It aims to amplify and bring to the fore diversity in leadership in technology.)

Dr. Sanna Gaspard is the Founder and CEO of Rubitection, a medical device start-up developing a diagnostic tool for early stage pressure detection, assessment, and management. She is an Entrepreneur, inventor, and biomedical engineer with a passion for innovation, entrepreneurship, healthcare and medical devices. She has received recognition and awards including being selected as a finalist for the Cartier Women’s Initiative Awards(’13), a semi-finalist for the Big C competition (’14), a finalist for the Mass Challenge Business accelerator in Boston, and taking 1st place at the 3 Rivers Investment Venture Fair’s Technology showcase (‘11). Her vision is to make the Rubitect Assessment System the global standard solution for early bedsore detection and management.

What makes you do what you do? 
I am driven to have impact and improve healthcare as I have a strong drive to problem solve, comes up with new ideas, and see them come to life.

How did you rise in the industry you are in? 
I first focused on getting the educational background and then I pursued the goals I have for myself. I got my PhD in Biomedical Engineering with a specialization in medical device development. Having the educational background is important as a woman and minority to assist people in taking your seriously.  After completing my PhD, I focused on bringing my invention for a medical device for early bedsore detection and prevention called the Rubitect Assessment System to market to help save lives and improve care.

Why did you take on this role/start this startup especially since this is perhaps a stretch or challenge for you (or viewed as one since you are not the usual leadership demographics)?
I started my startup, Rubitection , because I felt it was the best way to bring the technology to market. I knew that if I did not try to commercialize the technology, it would not make it to the doctors and nurses. I also have confidence that I could manage developing the technology since I had taken classes on entrepreneurship and had my PhD in biomedical engineering with a specialization in medical devices.

Do you have a mentor that you look up to in your industries or did you look for one or how did that work? How did you make a match if you did, and how did you end up being mentored by him/her?
No, I don’t have a specific mentor in my field. I am looking for one at the moment. However, I do look up to Steve Jobs and Oprah as examples of how one can start with nothing and work their way up and build a successful, global, and reputable business and brand.

Now as a leader how do you spot, develop, keep, grow and support your talent?  
I first try to find people who have fundamental technical or work experience to be competent to complete the work. I then evaluate the person for intangible skills like independent thinking, reliability, leadership, resilience, organizational skills, strong work ethic, open mindedness/flexibility, and good communication skills.

Do you consciously or unconsciously support diversity and why? 
I consciously make an effort as a minority woman in tech, I intimately understand the need to promote diversity within my business and outside my business. I first hire the best people for the job and also make a point to hire women and minorities qualified for the position.

What is your take on what it takes to be a great leader in your industry and as a general rule of thumb?  
It takes resilience, vision, being a team player, an ability to inspire others and delegate work, knowing your weakness, and knowing when to put your business or yourself first.

Advice for others?
My advice to others is to take calculated risks, pursue every opportunity, surround yourself with supporters, build your team with smart dedicated people, and stay focused on your vision. I am striving to implement this advice myself as I work towards commercializing my technology for early bedsore detection, grow my team, and recruit clinical partners to address an $11 billion US healthcare problem which affects millions around the world.

If anyone is interested in learning more about our work or company, please contact us at [email protected].

To learn more about Dr. Sanna Gaspard, CEO of Rubitection visit:

If you’d like to get in touch with Dr. Sanna Gaspard, please feel free to reach out to her on LinkedIn:

To learn more about Rubitection, please click here.

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Women on Top in Tech – Suzanne Wisse-Huiskes, Founder of MatchBox Consultancy and an Advocate at the Global Tech Advocates Network



(Women on Top in Tech is a series about Women Founders, CEOs, and Leaders in technology. It aims to amplify and bring to the fore diversity in leadership in technology.)

Suzanne Wisse-Huiskes is a Strategic Consultant and Founder at MatchBox Consultancy with offices in the United Kingdom and Nigeria. MatchBox provides expert advise in Impact Investing, Alternative Finance, Venture Capital, Fundraising, Women Leadership, Business Development, and Economic Empowerment. She is also an Advocate at the Global Tech Advocates Network. Dedicated to challenging talented entrepreneurs, Suzanne is an official mentor at startup/accelerator programs in Africa, Europe, and Asia. She was awarded top 400 most successful women in the Netherlands for two years in a row.

What makes you do what you do?
My drive is to enable entrepreneurs to grow their businesses by improving their access to funding. This can elevate an entire community. I believe that Alternative Finance can potentially be a powerful catalyst for shifting the way our financial markets work.

I love the ingredients of the alternative finance market: the innovative nature of the industry; the global playing field; the turbo speed of change. The market is booming and shows little sign of slowing down.

I founded MatchBox to support highly motivated entrepreneurs and investors in their mission to create profitable businesses with impact. MatchBox has become a trusted partner to these clients: they value our strategic and operational expertise, as well as our strong global network used to consult and connect. The requests vary from developing large investing programs to ensure access to capital for SME’s, to developing funding strategies for entrepreneurs. What works in one country may not work in others. We understand the local players and the local markets. This work is fully aligned with what is important to me.

How did you rise in the industry you are in?
I’ve been in the crowdfunding industry since 2008. Back then, Facebook only had a 100 million active users as opposed to the 2.000 million users today. Kickstarter, one of the world’s largest funding platforms, was yet to launch. Joining the industry that early in the game, allowed me to rise with it. I was fortunate to be part of initiatives that pushed the Alternative Finance ecosystem, first in Amsterdam, then on a broader European level.

Then later on other emerging markets began to interest me. I moved to Nigeria, to work in Africa’s fastest growing economy and home to exciting trends in capital and fintech. I familiarized myself with the investing ecosystems in African countries. Today, I work in alternative finance ecosystems in Asia, Africa and Europe. Being able to learn, share and compare best practices from different economies to me is key in the rise of the industry. Currently, the crowdfunding market in Asia alone is worth over 200 billion Euros. That’s huge!

Why did you take on this role/start this startup especially since this is perhaps a stretch or challenge for you (or viewed as one since you are not the usual leadership demographics)?
I’ve always followed my heart in my professional life. I focus on work that I am passionate about and am not afraid to take the path less travelled. So leadership, demographics never held me back. With my experience and skills I am well positioned to successfully get the job done. For me it doesn’t feel like it’s a stretch.

Even more so, my clients see it as a big advantage to have women on the job. I recently worked on an impact investing program in West Africa focussing on women-led SME’s and experienced the benefits of a diverse team. Women entrepreneurs see the world through a different lens and, in turn, do things differently.

Do you have a mentor that you look up to in your industries or did you look for one or how did that work? How did you make a match if you did, and how did you end up being mentored by him/her?
The industry was completely new when I started, with no seniors to learn from. As a strong believer in mentorship, I do reach out to people in other industries for feedback and to bounce ideas.

I also learn a lot from working with various entrepreneurs. Collaborating with Sir Richard Branson in the beginning of my career was encouraging. We did a successful Crowdfunding Campaign for the elephants in Botswana. But I’m equally impressed by entrepreneurs that make a huge impact on their community no matter the circumstances. I’ve seen exceptional people grow businesses in the poorest regions of Nigeria. One can only admire their leadership.

Now as a leader how do you spot, develop, keep, grow and support your talent?
For me, mentoring young entrepreneurs is a great way to develop and grow talent. My focus is usually on two mentees at a time to ensure there is enough time to discuss ideas and challenges. I worked at fintech startups for almost 10 years before founding MatchBox. So there are plenty of stories to share and learn from, both on failures as well as on successes.

Do you consciously or unconsciously support diversity and why?
I’m very vocal on the need for diversity. I’ve always found myself in the male dominated groups. First at University, then in my first corporate position, and later as a Board Member. At some of my MBA Finance classes, I was the only woman in a room of 50 men. It never bothered or intimidated me. It just made me work a little harder.

Nonetheless, diversity is much needed. I strongly believe the industry is missing out on many brilliant women. That is why I dedicate a great deal of time mentoring female entrepreneurs. We discuss the tools their businesses require to grow and attract the right type of capital. Investors still have a different approach towards female founders. This year, we are launching an initiative called ‘the Republic of Female Founders’, to provide practical tools and guidelines that are specific for this group.

What is your take on what it takes to be a great leader in your industry and as a general rule of thumb?
My general rule of thumb: If you want to go fast, go alone. If you want to go far, go together. For me, it’s all about collaborative leadership. My industry is becoming increasingly complex, so sharing best practices will bring us far. That’s why I became an Advocate of the Tech Shanghai Advocates, part of the Global Tech Advocates. This group of senior leaders in the tech community is created to champion and accelerate the growth of the local technology sector.

I am also a fan of the CrowdfundingHub and Crowddialog in Europe, and Ingressive in Africa for similar reasons: Ordinary people doing extraordinary things because they believe in the positive impact of innovation in finance. My peers are all trailblazers in the alternative finance industry, I consider myself to be in great company.

Advice for others?
I strongly believe in collaboration, so building business relationships is key. I truly foster my relations. To me it doesn’t feel like work, but rather like building bonds. Seek opportunities to connect and reach out. It really pays off to have a strong network. At MatchBox, I work with a network of exceptional local experts. If you need advice and consulting on your funding strategy, impact investing program or crowdfunding strategy, we will gladly work with you. Contact us at MatchBox.

If you’d like to get in touch with Suzanne Wisse – Huiskes, please feel free to reach out to her on LinkedIn:

To learn more about MatchBox Consultancy, please click here.

To learn more about  Global Tech Advocates Network, please click here.

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