Cepnik A+New+Look+at+the+Bitcoin+Blockchain Blockchain+Research+Institute

A NEW LOOK AT THE BITCOIN BLOCKCHAIN
How Innovation in Bitcoin’s Technology Stack

Is Creating New Enterprise Use Cases
Maciej Cepnik, Gustavo J. Flores Echaiz,

Tristan Borges Solari, and René Vergé
Veriphi
July 2020
A BLOCKCHAIN RESEARCH INSTITUTE BIG IDEA WHITE PAPER

© 2020 Blockchain Research Institute. All rights reserved.
Realizing the new promise of the digital economy
In 1994, Don Tapscott coined the phrase, “the digital economy,” with his
book of that title. It discussed how the Web and the Internet of information
would bring important changes in business and society. Today the Internet
of value creates profound new possibilities.
Don and Alex Tapscott launched the Blockchain Research Institute to help
realize the new promise of the digital economy. We research the strategic
implications of blockchain technology and produce practical insights that will
guide our members in achieving success.
Our global team of blockchain experts is dedicated to exploring,

understanding, documenting, and informing leaders of the strategies,
market opportunities, and implementation challenges of this nascent
technology. Research projects are underway in the areas of financial
services, manufacturing, retail, energy and resources, technology,
media, telecommunications, healthcare, and government as well as in the
management of organizations and the transformation of the corporation.
Our findings, conclusions, and recommendations are initially proprietary to

our members and are ultimately released under a Creative Commons license
to help achieve our mission. Each research publication includes a video
introduction by Don and an infographic for members’ use in communicating
these ideas throughout their organizations. To find out more, please visit
www.blockchainresearchinstitute.org.
Research management
Don Tapscott — Co-Founder and Executive Chairman

Kirsten Sandberg — Editor-at-Large
Hilary Carter — Managing Director
Others in the BRI leadership team
Alisa Acosta — Director of Education

Wayne Chen — Director of Business Development
Maryantonett Flumian — Director of Client Experience
Roya Hussaini — Director of Administration
Jody Stevens — Director of Finance
Alex Tapscott — Co-Founder
Contents
Foreword 3
Idea in brief 4
Introduction 4
Bitcoin improvement proposal: The process of
determining upgrades 5
Forks: The nature of blockchain software upgrades 6
Native coin: A means of preserving privacy 9
Applications for business 11
Timestamping 12
Store of value and custody 14
Sidechains 16
Capabilities in development 19
Scalability 19
Privacy 21
Programmability: Smart contracts 22
Path to mass adoption 24
Use cases: Sparked by lightning 26
Implementation challenges 29
Unsustainable funding model 29
Free-rider problem 30
No dedicated marketing or public relations 31
Conclusions 31
Recommendations 33
About the authors 35
Notes 37
Foreword
The experts behind this research take a fresh look at the Bitcoin
network and its native currency, bitcoin. They argue that, while the
Bitcoin protocols have proven successful for various applications
(specifically its monetary and financial functionalities) during their
years of existence, they’ve reached such limitations as scalability,
privacy, and programmability.
Because of these implementation challenges, enterprise leaders have

looked to other blockchain solutions to fulfill the business promise of
the blockchain revolution. For some organizations, the deviation from
the first cryptocurrency in terms of market capitalization was short-
lived, as different development teams have found innovative ways to
evolve the Bitcoin network and its related technologies.
By building directly on top of the existing Bitcoin infrastructure,

businesses can profit from its enormous network effect, and they
While the Bitcoin protocols
need not incur the costs and risks associated with developing an
have proven successful independent platform that would not benefit as much in terms of
for various applications popularity and strength.
during their years of
existence, they’ve reached The expert team behind this research was led by Maciej Cepnik,
such limitations as director of sales and marketing at Veriphi, a Bitcoin solutions
scalability, privacy, and company based in Montreal; René Vergé, Veriphi’s legal counsel and
cybersecurity and privacy director; Gustavo Flores Echaiz, director of
programmability. product and research at Veriphi; and Tristan Borges Solari, Veriphi’s
co-founder and its finance and operations director. They work at the
cutting edge of the Bitcoin protocols, and their view is a fresh and
forward-looking one.
DON TAPSCOTT
Co-founder and Executive Chairman
Blockchain Research Institute
3 © 2020 BLOCKCHAIN RESEARCH INSTITUTE

Idea in brief
» Governance of the Bitcoin network is decentralized. The
Bitcoin protocols evolve through Bitcoin improvement
proposals implemented through soft forks according to the
backward-compatibility principle. Prior to forking, users signal
their intention to adopt each upgrade. The consensus wins.
Users can choose to reject any upgrade and continue using
the unaltered code.
» Applications for business include timestamping—inserting

hashed information inside a block as evidence that the
information existed at that given moment—storing value in
markets experiencing hyperinflation, custody services for
digital assets, and the creation of adjacent digital assets with
different properties through sidechains to name a few.
» Important capabilities are in development to address the

challenges of using the Bitcoin network for large enterprise:
Schnorr signatures for increasing transactional throughput,
Miniscript for writing smart contracts (including discrete log
contracts), and Taproot for hiding those contracts in plain
The Lightning Network sight on the Bitcoin blockchain.
might resolve Bitcoin’s
» The Lightning Network, a second-layer solution, might resolve
scalability issues, thereby Bitcoin’s scalability issues, thereby bringing new business
bringing new business opportunities for enterprises and supporting such uses cases
opportunities for as machine-to-machine payments, microtransactions without
enterprises. account subscriptions, multiparty interbank settlement
networks, encrypted chat communication, high-load
computing, and machine learning transaction settlement.
» Unlike many other cryptocurrencies, there are no funding

streams generated through the protocol itself to compensate
developers. Nobody is directly paid for working on
Bitcoin unless they also mine bitcoin. Nor is anyone paid
for marketing or public relations. This model of funding
development and promotion is unsustainable. The Bitcoin
ecosystem can’t count on the endless price appreciation of its
native asset.
Introduction
The Bitcoin blockchain stands out from many other cryptocurrency
projects in that it started without any venture capital money or
publicly raised funds on record. As the blockchain network with
the largest market cap, it is also unusual in that, apart from the
open-source community, it has no official company or foundation
overseeing its development.1 Since Bitcoin’s creator Satoshi
Nakamoto last communicated with developers in early 2011, the

development structure of Bitcoin has remained horizontal—no

authoritative figure is dictating its development.2 Every line of code,
every idea, and every proposition is highly scrutinized by the wider
open-source community, instead of a corporate structure. So how
does it continue to address the needs of its users? Through the
Bitcoin improvement proposal as a process, forks for implementation,
and its native token bitcoin as an incentive for participation.
Bitcoin’s network of
contributors and developers
Bitcoin improvement proposal: The process of
will extensively test and determining upgrades
review the improvement Bitcoin adopts new development ideas slowly. Before the core
proposals before the core developers may implement a change, the wider community discusses
developers include them it on GitHub and through an open mailing list.3 After discussion
in a version of the Bitcoin and refinement, the creator of the idea proposes it to the Bitcoin
Core software. improvement proposal (BIP) list. Bitcoin’s network of contributors and
developers will extensively test and review the BIP before the core
developers include it in a version of the Bitcoin Core software.
This is the case for non-protocol changes. When the protocol is

modified and a soft fork is proposed, discussions of the change
happen over many years in the public communication channels.
The developer must propose an activation method, and the wider
community must agree upon it. The discussion around the latest soft
fork upgrade, Segregated Witness (SegWit), lasted around two years.
Its activation method consisted of two core components: miners
signalization (BIP-91) proposed by James Hilliard and a user activated
soft fork (UASF) (BIP-144) proposed by Eric Lombrozo and Pieter
Wuille.4 The UASF brought thousands of nodes to signal their support
for SegWit and their intention to proceed with the upgrade on
1 August 2017, unless miners signaled support for a SegWit fork with
a consensus of 95 percent. In February 2019, pseudonymous user
shaolinfry proposed a different software implementation (BIP-148
and BIP-149).5 A few days before the deadline, the miners signaled
almost unanimous support for SegWit. This is an example of how
Bitcoin Core doesn’t have control of protocol upgrades; users can
simply spin up a competing software implementation and other users
can signal their support for a desired feature.
Through this process, the community can unequivocally approve any

code injected in the official Bitcoin Core repository. Currently, several
Through the BIP process,
important BIPs in the backlogs are expected to bring more flexibility
the community can and programmability to the Bitcoin network and to usher in Bitcoin’s
unequivocally approve any next phase of worldwide usage and adoption.
code injected in the official
Bitcoin Core repository. Some may see the absence of corporate structure as a weakness,
but its absence is inevitable if Bitcoin is to remain decentralized. The
lack of on-chain governance also makes the development of Bitcoin
much slower than that of other chains, which have more flexibility
to experiment with different technologies. However, this slow and
steady approach has helped ensure that changes are implemented
only if they have been thoroughly tested and reviewed. Change
occurs only when the open-source community reaches consensus on

that change, and then the network will benefit from it. In the section,
“Capabilities in development,” we discuss how these improvements
will help the Bitcoin network scale, achieve greater privacy, and
implement smart-contract capabilities in later sections of this paper.
Forks: The nature of blockchain software upgrades

Bitcoin follows a backward-compatibility principle, meaning that any
Bitcoin follows a improvement to the protocol must be completely compatible with
backward-compatibility earlier versions of it. Contrast that with Ethereum, which implements
principle, meaning that upgrades though hard forks that are not backward compatible. That’s
any improvement to a strategy similar to Microsoft’s Xbox upgrades. When Microsoft
the protocol must be publishes new games for its latest model, owners of older models
can’t play them. This is often a strategy of planned obsolescence, a
completely compatible with
means of tempting users to adopt the new device even though their
earlier versions of it. old devices work perfectly well. It’s a good strategy for a consumer
products business. But public blockchain networks aren’t businesses
and shouldn’t behave that way; and yet creating a backward-
compatible upgrade is an enormous challenge for developers, since
they must conceive of new layers and technologies in Bitcoin within
the constraints of the existing chain and original protocols.
Lost in the maze by Burst (@burst), 2018, used under Unsplash license, accessed
5 July 2020.
To improve an existing cryptocurrency system, developers implement

changes through either a soft fork or a hard fork. Soft forking a
cryptocurrency means that any change brought to the software
protocol will not split the existing blockchain. It will continue its
course without disrupting its users; all of them will agree on the
same shared history of transactions. The most famous soft fork in
Bitcoin was SegWit, which was activated on 24 August 2017 to bring
scalability to the Bitcoin protocol and remove the malleability of
transaction identifiers.6
Hard forking is a more drastic way to modify a cryptocurrency

protocol. With hard forking, the protocol changes are so

fundamentally different that any part of the network that doesn’t

agree on the new set of rules will separate from the part that
supports it. Simply put, a hard-forking event divides a blockchain in
two and results in two cryptocurrencies instead of one.
For example, in 2016, someone hacked the DAO, a decentralized
autonomous organization built on top of Ethereum. The hacker was
able to steal more than $50 million worth of Ethereum tokens from
a defective smart contract.7 In response, the main developers of
A hard-forking event
Ethereum modified the history of Ethereum: they reset it to a state
divides a blockchain in of the Ethereum blockchain prior to the hack, effectively changing
two and results in two its history. Although this action was well received by most of those
cryptocurrencies instead of who got their money back, a part of the Ethereum community
one. didn’t agree with this decision. Many considered it an unacceptable
centrist intervention that contradicted the ethos of decentralization.
As a result of this disagreement, a portion of the network chose
to continue developing and maintaining the unaltered version of
Ethereum.
Two blockchains now exist, each with its own kind of Ethereum
tokens. The unaltered Ethereum chain is known as Ethereum Classic
(ETC). The hard-forked chain is known as the official Ethereum
chain; its native coin is ether (ETH).8 This hard fork is one of many
examples throughout the history of cryptocurrencies.9
After much debate, the Bitcoin community decided that modifying

any part of the original protocol would deteriorate Bitcoin’s value
proposition as a sound and hard money. As Saifedean Ammous
explained, hard money is money in which the supply is hard to
increase.10 If the community changed some of the original rules of
Bitcoin, such as its block size, then it might reconsider changing
other rules, such as the total numbers of bitcoins, in the future.11 This
isn’t preferable, however. That Bitcoin’s rules are incredibly resistant
to change make it predictable. Alterations would reduce its value as
hard money.
Developers and stakeholders of other cryptocurrencies and

blockchains have different perceptions of how they should scale their
Developers and respective underlying systems. Many have an established governance
structure and defined research objectives, overseen by a company
stakeholders of other
or a foundation, or both. For example, Ethereum is launching Casper,
cryptocurrencies and a subsequent version of its protocol, with a different set of rules.12
blockchains have different Therefore, the Ethereum 2.0 chain will not be compatible with the
perceptions of how previous one. Users may need to migrate to Casper to remain active
they should scale their within the system. By following the backward-compatibility principle,
respective underlying Bitcoin Core developers are ensuring that its users will never have to
upgrade their software to remain relevant or compatible within the
systems.
network.
These core developers have resolved countless bugs and made

improvements to the Bitcoin protocol since its inception without
ever breaking this crucial principle, except on one occasion when
a user exploited what was called a “value overflow bug” to create
184 billion bitcoins in two transactions.13 The core developers at the
time—Satoshi and Gavin Andresen among them—worked out a fix

that addressed the problem and restored the Bitcoin blockchain to a

time before the hack.14 If we downloaded the earliest Bitcoin software
from 2009 and patched that bug, we could transact with today’s
version.15 Let’s distinguish these backward-compatible improvements
from modifications that resulted in hard forks.
Bitcoin has its set of vocal users arguing for protocol changes. One
of the most controversial rules was Bitcoin’s block size. Some Bitcoin
The arguments and users, such as Roger Ver, thought that the preferred way to scale
scandals provoked by the Bitcoin was by increasing its block size. This would permit miners to
debate over block size have include more transactions inside every block and theoretically would
become collectively known increase the number of transactions per second. The arguments and
scandals provoked by this debate have become collectively known as
as the Scaling Wars. the Scaling Wars.16 These wars resulted in numerous hard forks to
Bitcoin, with Bitcoin Cash (BCH) being the most popular.17 Whatever
happens among the developers, the big companies using bitcoin, and
the affluent cryptocurrencies, the users of the Bitcoin network are its
ultimate decision-makers. Despite the countless forks, the metrics
are clear. It has the largest number of users, the highest hash rate,
and the higher price in terms of fiat currency (Table 1). Looking at
Bitcoin’s history, we can infer that this trend will continue. Individuals
and companies might want to adapt to Bitcoin, instead of trying to
adapt Bitcoin to themselves.
As more backward-compatible changes are implemented in the

protocol, the first layer and its rules will gradually but surely go
through an ossification phase. In other words, changing anything
from the foundational layer will be more difficult as we build more on
top of it. We can compare this ossification to other known technology
protocols such as the incredibly robust and useful transmission
control protocol/Internet protocol (TCP/IP).
Table 1: Bitcoin by the numbers

1 TH/s = one trillion hashes per second; 1 EH/s = one quintillion hashes per second.
Ethereum
Bitcoin Bitcoin Cash Ethereum
Classic
Date of code
3 Jan. 2009 1 Aug. 2017 20 July 2016 30 July 2015
implementation
Price $9,069.56 $217.03 $222.42 $5.60
Circulating supply 18,416,420 18,433,761 111,527,930 120,713,020
Market
$167,028,816,445 $4,000,709,906 $24,806,478,136 $676,432,312
capitalization
Active addresses
641,149 55,636 520,578 26,952
(last 24 hrs)
Hash rate 123.5 EH/s 2.666 EH/s 188.114 TH/s 6.408 TH/s
Sent last 24h $6,347,734,881 $104,368,461 $404,893,300 $7,840,940
Source of data: BitInfoCharts.com, accessed 27 June 2020 18:45 EST.

Every modern application, website, or computer-based

communications system is built atop TCP/IP’s principles and rules;
they cannot function without transmitting data over that layer. Some
might consider the TCP/IP to be an incredibly old technology, but
modifying it would be inconceivable, since it’s the foundation of all
our current systems. TCP/IP emerged in its final form in 1978.18
By 1983, it had replaced old communication protocols.19 In the
blockchain space, Bitcoin is similar to it: the Bitcoin protocols can
The lack of capital serve as base layer that becomes more robust as we develop new
dedicated to Bitcoin technologies on top of it (Figure 1).
development makes
attracting skilled developers Native coin: A means of preserving privacy
a challenge, but it also
Behind the development of the Bitcoin protocols was the Cypherpunk
prevents a central authority
ideal of privacy preserved through distributed and anonymous
from misusing the money. transaction systems that were free for all to use and maintained
by those users—all for the common good.20 Therefore, the Bitcoin
protocols distribute block rewards entirely to the miners, among
mining pools according to their respective proportion of the network
hash rate (Figure 2, next page). Zero block rewards go to those
developing the protocols, unless they’re also mining bitcoin or a
member of a mining pool.
In contrast, development teams of other cryptocurrencies have

assigned themselves a portion of the rewards associated with the
validation of a block. For example, those behind Zcash, a project
focused on private transactions, are redistributing 20 percent of
Zcash’s mining reward among the Zcash Foundation, the Electric Coin
Company, and community grants.21
The lack of capital dedicated to Bitcoin development makes attracting

skilled developers a challenge, but it also prevents a central authority
from misusing the money. And so developers are motivated not by
financial gain, but by the potential of using money that represents
their values of monetary sovereignty.
This base has evolved throughout Bitcoin’s history, as different

interest groups have emerged and sought ways to make Bitcoin
more attractive to them. Institutions and enterprises such as Fidelity
Figure 1: Bitcoin protocols: Base layer of the Internet of Value
© 2020 Veriphi. Adapted with permission. All rights reserved.

Digital Assets, Microsoft, and Bakkt have financed researchers from

various spheres to work directly on Bitcoin. Interest from developers
in this kind of initiative has been growing as they find suitable
environments and professional communities in which to showcase
their skills.
For example, one of the most advanced and popular initiatives has
come from the Scaling Bitcoin Conference, first held in Montreal in
Scaling Bitcoin Conference 2015. It began as an initiative by the Bitcoin development community
distinguished itself by its and was supported by the Massachusetts Institute of Technology,
academic approach and Chaincode Labs, and Blockstream.22 Intended to be the most
its focus on solving real advanced technical conference tailored to engineers and developers,
the gathering distinguished itself by its academic approach and its
problems.
focus on solving real problems.
The conference itself is continuously growing and raising interest

around the world. Before the 2019 conference, conference organizer
Bryan Bishop, a Bitcoin Core developer, tweeted, “I’m reviewing 456
Figure 2: Bitcoin hash rate distribution
Source of data: Blockchain Explorer, Blockchain Luxembourg SA, www.blockchain.com/pools, accessed 27 June 2020.

pages of #bitcoin research papers and proposals for @scalingbitcoin

2019. This number is up from 283 pages in 2018, and 235 pages
in 2017.’’23 The 2019 conference was sponsored by companies such
as Blockstream, Chaincode Labs, and Digital Contracts Design, the
success of which depends on the growth of the Bitcoin ecosystem.24
But as the Bitcoin ecosystem grows, the business models constructed

around it increasingly vary. In addition, as the technology behind
By contributing to the the ecosystem evolves, the opportunities to build solutions in Bitcoin
evolution of Bitcoin, expand. Companies operating in this industry realize that they can’t
businesses gain significant simply free ride on the Bitcoin protocol without actively engaging
influence over the in its development. By contributing to the evolution of Bitcoin,
businesses gain significant influence over the development of the
development of the whole whole space. Throughout, we explore the numerous current and
space. future applications of the Bitcoin protocol that companies could use
effectively.
Applications for business

Large organizations can use a wide variety of commercial
applications of the Bitcoin protocol. Here we will examine existing and
in-development enterprise-grade features.
In the beginning, bitcoin became notorious for its use in some shady
darknet marketplaces. The infamous Silk Road, for example, was the
first “dark web” site where users could purchase drugs and other
illegal merchandise. Founded in 2011 by Ross Ulbricht, it attracted
the attention of the media and several federal agencies.25 Coverage
of the arrest of its founder in October 2013 helped to propel bitcoin
into mainstream conversation.26 This type of illicit enterprise wasn’t
possible before, since criminal enterprises lacked the means to
accept payments over the Internet in a reliable and private way.
A lot has changed since then. According to Chainalysis, criminal

activities account for only one percent of the total activity of bitcoin
these days.27 Recognized brands such as Microsoft and Square
are now vocal about their use of bitcoin within their organizations.
Their leaders see an opportunity in offering services in bitcoin or in
In the beginning, bitcoin exploiting its technological functionalities. Others recognize bitcoin
became notorious for its as a means of storing value and hedging against systematic risk. This
use in some shady darknet type of usage is present mostly within atypical investment companies
such as Adamant Capital, but larger organizations such as Fidelity
marketplaces. Investments also use it that way.28
Bitcoin is also very effective in transferring large amounts of value

securely on its base layer (Figure 1, page 9) at relatively low cost.
For example, in September 2019, a transaction worth $1 billion at
the time was transferred between two unknown addresses. The total
cost was only $690—vastly lower than the cost of a traditional money
transfer.

This type of financial usage is more frequent and varied. A lending

market is also forming on top of the Bitcoin network. Using secured
cryptographic proofs, bitcoin users can now present bitcoin as
collateral to borrow fiat currency. We explore different enterprise
use cases for finance and other functions through innovation in
sidechains and layers of the Bitcoin protocol stack.
One of the most desired Timestamping

applications of a blockchain One of the most desired applications of a blockchain is
is timestamping—inserting timestamping—that is, inserting hashed information inside a
hashed information inside timestamped block as evidence that the information existed at
a timestamped block that given moment. If the blockchain remains immutable and the
timestamping hasn’t been compromised, other actors—such as the
as evidence that the
supreme courts of Nevada, Arizona, and Vermont—may accept it as
information existed at that proof.29 In addition, the Supreme People’s Court in China accepted
given moment. blockchain timestamps as proof in a Hangzhou case in 2018.30
The question is whether the blockchain used is truly immutable and

has properly timestamped the information. The Bitcoin blockchain is
known to provide enormous irreversibility, which is the main factor of
immutability for a blockchain.
Footprint Mark Seals Timestamp Authenticity Former by claude alleva

(claude05alleva), 2014, used under Pixabay license of 27 March 2020. Cropped.
How do the Bitcoin protocols prevent users from reversing a block?

The simple answer is hashing power. In mid-March 2020, when
Bitcoin’s hash rate was around 124.25 EH/s, we would have needed
62.125 EH/s of power to control 51 percent of the Bitcoin network.31
We could have used 927 240 Bitmain Antminer S17 machines, the
most sold model, but those would have cost us $1.5 billion, plus
$477.68 million per year for electricity to run them.32 We’d also
need to incur several other costs; even then, we’d have only a slight
advantage over the rest of the network, with almost no guarantee

that our attack would succeed. On the other hand, if we simply act
honestly, we would get half of the Bitcoin network rewards.
Because the Bitcoin network status represents a consensus of more

than 55,000 servers running around the world, and the Bitcoin
protocol requires a block to be at a maximum time difference of three
hours from the real time, we can rest assured that timestamping on
the Bitcoin blockchain is as trustworthy as decentralized consensus
A Merkle tree is a can be.33
cryptographic technique for
taking many hashes and Timestamping itself is a simple process, although some additional
combining them in a super components are necessary for real-world applications to happen
hash. inside the Bitcoin blockchain. First of all, to preserve our privacy,
we need to hash the information that we want to insert. Since the
Bitcoin blockchain has a block size limit of around two megabytes of
information, we should timestamp information in a cryptographically
sound and scalable way. The best option is a Merkle tree.
A Merkle tree is a cryptographic technique for taking many hashes

and combining them in a super hash. We can repeat this procedure
many times, so that a single hash is valid for an almost infinite
amount of information. Through Merkle trees, businesses like
Acciona, EDF, Kering, and Servier can use the Bitcoin blockchain at
scale today for all their timestamping applications without spending
huge amounts in transaction fees.34 The most-used protocols,
OpenTimestamps founded by Peter Todd and Chainpoint by Tierion,
use Merkle trees to scale this application.35
Let’s look at the Kering Group’s use of timestamping. Based in

Paris, Kering is a French international luxury group with a market
capitalization of $67.65 billion and brands such as Gucci, Saint
Laurent, and Ulysse Nardin.36 Isabelle Bonnet, a freelance consultant
and blockchain expert, was the lead of a highly innovative project
that introduced warranty certificates anchored in a blockchain.37
Swiss watchmaker Ulysse Nardin launched this capability at the
beginning of January 2020. The watchmaker’s clients now benefit
from a certificate of authenticity timestamped into the Bitcoin
blockchain for every watch they buy.38
Certificates of authenticity aren’t innovative by themselves;

As a mark of authenticity, numerous luxury companies, including LVMH’s Louis Vuitton brand,
the cryptographic hash hand them out to their customers to preserve brand recognition
derived from a Merkle and prestige. The innovation comes from authenticity preserved
tree is virtually impossible by a cryptographic hash derived from a Merkle tree that is virtually
to reproduce without the impossible to reproduce without the exact original information. The
Kering Group has worked extensively with Woolet, a French Bitcoin
exact original information. start-up, to provide a scalable and enterprise friendly solution for
timestamping in Bitcoin. The solution fits into existing customer
relationship management and logistics software that companies use
so as not to disrupt Kering’s ongoing operations.
So why did Kering choose the Bitcoin platform instead of other public
or private blockchains? Bonnet explained what convinced Kering to
adopt a Bitcoin-based authentication solution:

When seeking the verifiability aspect of blockchain, a public

blockchain is the natural proponent since all its information
can be accessed at any moment by anyone. Therefore,
you must also look for a strong network that supports the
blockchain, so that the proofs inserted inside of it have
credibility and value. Bitcoin has the strongest network
because of its wide network of nodes. Also, since it hasn’t
been hacked since its inception, it gives a lot of credibility to
"Because of the proven the authenticity of the data inserted inside. Therefore because
history of Bitcoin and the of the proven history of Bitcoin and the robustness of its
robustness of its network, it network, it was the natural choice.39
was the natural choice."
The luxury industry has a clear use case for the timestamping
capability of Bitcoin. Companies have a need to validate the
ISABELLE BONNET authenticity of their product for their clients and preserve brand
Freelance consultant and uniqueness and exclusivity. Therefore, they positively perceive
blockchain expert the cost to timestamp a certain piece of data inside the Bitcoin
blockchain, and Kering could extend this application to anything
where the value of which relies on data validation and authenticity.
Store of value and custody

Bitcoin is often compared to gold. Its scarcity makes it attractive,
as nobody can control its supply. Many bitcoin advocates will hold
onto the native coin as a store of value like gold because they expect
the demand for it to keep rising. More generally, when people talk
about using the Bitcoin blockchain, they mean using it for its financial
and transactional attributes comparable to payment systems. The
developments around the financial properties of bitcoin are signs
of its institutionalization and financialization. Let’s consider what
enhances people’s perception of bitcoin as money.
Bitcoin usage and trading has been particularly popular in countries

experiencing hyperinflation. Even if bitcoin is a highly volatile asset—
its value in dollars can vary quite rapidly and drastically—it is still
Gold Wealth Finance Deposit Bullion Business Bank by PublicDomainPictures /

17907, 2013, used under Pixabay license of 27 March 2020. Cropped.

considered an uncorrelated asset. Citizens who are experiencing a

rapid devaluation of their national fiat currency will seek alternative
forms of money to preserve value for everyday needs. Regular
citizens using it to store value in countries like Venezuela and
Argentina have created increasingly active bitcoin markets. Bitcoin
is also highly divisible and portable. It is much easier to use than a
safe-haven asset like gold.
Bitcoin is highly divisible More stable countries such as the United States of America or
and portable. It is much Canada have control over their monetary expansion. They generally
easier to use than a safe- succeed in maintaining an inflation rate of two or three percent,
haven asset like gold. a highly anchored and established acceptable inflation range in
the economic and political sphere.40 Although this rate seems
insignificant, when compounded over the years, it erodes the value of
money quite rapidly. For example, from 1903 to 2003, the American
dollar lost 95 percent of its value.41 Inflation aside, corporations and
individual investors in these countries will seek alternative sources
to store their wealth, such as gold, since it is mostly not correlated
with financial assets like stocks and bonds. Although bitcoin isn’t
considered a safe haven, it is uncorrelated with other popular
financial instruments, according to SFOX’s recent analysis.42 This lack
of correlation might attract companies to use it to store their wealth.
Whatever the reasons for a corporation or individuals to convert their

fiat currency into bitcoin, they must employ proper storage measures
for their digital assets. Users have struggled to secure their bitcoin,
as the different technologies necessary for good operational security
are often difficult to use and understand. Companies such as Bitgo,
Xapo, and Knøx have taken the goal to resolve that problem by
offering custody services for digital assets. The Block reports that
this space has seen tremendous growth during 2019.43 Investment in
the space has totaled $1.3 billion so far, and is expected to grow.
Knøx, a player in the field of digital custody space, received more

than $8.25 million in funding from organizations such as Fidelity.44
Thibaud Maréchal, vice president of Knøx, pointed out the difficulties
and possible solutions coming with corporate bitcoin holdings:
"Financialization of bitcoin
is not only inevitable, it’s Bitcoin is an ultra-scarce digital bearer asset, which makes it
desirable, bringing liquidity hard to securely hold for institutions and enterprise. Insured
and easier ways for indirect bitcoin custody is a way to cap downside risk for investors
retail exposure." looking for a long exposure to the asset. In relative BTC
terms, because of bitcoin’s scarcity, other assets tend to
depreciate. With proper insurance coverage, risk of theft and
THIBAUD MARÉCHAL
loss is mitigated, further reinforcing bitcoin’s asymmetric risk-
VP Growth
adjusted return in a context of global macro uncertainty.45
Knøx Industries
As bitcoin rises in the global financial scene, we could assist in the
creation of additional and more sophisticated services around this
digital asset. Maréchal of Knøx sees the future of the bitcoin store of
value use case and its adoption by financial institutions. He said:
Financialization of bitcoin is not only inevitable, it’s desirable,

bringing liquidity and easier ways for indirect retail exposure.

Institutionalization of bitcoin ought to be ethical and rigorously

principled. Synthetic bitcoins will emerge but fractional bitcoin
reserves will be put to sleep [because of] bitcoin’s verifiable
nature and high portability.46
Sidechains
Sidechains are hugely versatile blockchain structures that can
Sidechains are hugely bring a whole new set of malleable features to a public blockchain,
versatile blockchain first proposed by a group of renowned Bitcoin researchers from
structures that can bring a Blockstream.47 To connect a sidechain with the Bitcoin blockchain,
whole new set of malleable one must use a two-way peg system. The pegging process starts
features to a public when someone decides to lock bitcoins cryptographically on the
first layer with a tool such as a multisignature scheme. The locking
blockchain.
mechanism is ensured by a chosen group of signatories who will
guarantee it won’t budge until its owner decides to move it. The
signatories have incentive to act unmaliciously with a reputation-
based system.
By locking conjointly some bitcoins on-chain, the group of signatories

can create an adjacent asset that represents the locked bitcoins.
They can proceed to use this newly created asset as bitcoin but free
from its numerous rules, since theoretically they are using it outside
the Bitcoin network. We can find a simple analogy for this process
in the creation of the checks system in the fifteenth century, when
exchanging money for goods over big distances was very dangerous
and impractical, especially in large amounts.
Gold bullion and coins were the most universal money through
different cultures, and therefore were accepted for payment almost
anywhere. Whether on the Mediterranean Sea or on the Silk Road,
travelers had to carry the heavy gold with them and were under
threat of bandits or pirates. Some merchants sought to create a
network of connected and trusted partners who could hold securely
gold in vaults and transact it without ever moving a gram of it.
Checks—and therefore banks—were born. Their clients could now
deposit an unlimited amount of gold and receive a check that they
could later redeem for its full value in gold in another location.
With sidechains,
corporations can profit A sidechain exploits technology and cryptography to transform
bitcoins into malleable and scalable IOUs. By establishing a reliable
from the security and the and secure link between Bitcoin and a sidechain, corporations can
network effect of Bitcoin profit from the security and the network effect of Bitcoin without
without compromising their compromising their specific needs. This solution was initially meant
specific needs. to resolve scalability issues but led instead to another paradigm
of possibilities and interoperability features between different
blockchains. Pegged bitcoins have no technological limitations,
since they are simple digital messages. Users can exchange, divide,
and recombine them multiple times at virtually zero cost before
redeeming them on the first layer of Bitcoin. The cumbersome task
falls onto the group maintaining the sidechain: they will have to
track, store, and protect the history of these transactions so that
every party to the transactions can claim their rightful bitcoins.

Corporations might appreciate the monetary soundness of bitcoin

and its high level of security. However, a constraint such as the block
time, and therefore the speed of the transactions, might make them
reluctant to use it. Starting a new public network from the ground up
can be difficult. Joining one that has already proven its robustness
is the safest decision if one wants to profit from it. In addition,
new cryptocurrencies might have liquidity and security issues. We
can think of sidechains as the natural evolution of the blockchain
Each sidechain has its own technology in a business world that requires hyperconnectivity and
set of rules, defined by its interoperability.
creators and intended to
adapt the blockchain to Each sidechain has its own set of rules, defined by its creators and
intended to adapt the blockchain to changing requirements. These
changing requirements. rules will depend on the industry of its targeted users. Concrete
sidechain ideas and use cases have materialized in a few projects
and enterprise-grade solutions, such as the Tether stablecoin on the
Liquid Network, Coinshares DGLD gold-backed token, and the digital
identity system used by Enargas, which regulates Argentina’s natural
gas, on RSK.48
Neil Woodfine, marketing director at Blockstream, discussed

Blockstream’s application of sidechain technology.49 The company
has developed Liquid, the most used and complete sidechain so far,
a network maintained by 15 pseudonymous functionaries that hold
the responsibility of managing users’ funds through a multisignature
contract among these 15 signatories.50 More than 40 cryptocurrency
companies have joined this innovative network for the following
features.51
Splashing Splash Aqua Water Pouring Clear Droplet by PublicDomainPictures /

17907, 2013, used under Pixabay license of 27 March 2020. Cropped.
Liquid users can use L-BTCs, the pegged bitcoin equivalent on

the Liquid sidechain, to settle transactions faster than on the
original Bitcoin chain. Blocks are produced and validated every
minute on this sidechain network, versus every 10 minutes on the
Bitcoin blockchain. Also, thanks to the adoption of the confidential
transactions cryptographic protocol, transactions on Liquid are
considerably more confidential than on Bitcoin, an attribute highly
sought by companies using Bitcoin.

When asked about the current usage and use cases for the Liquid
Network members, Neil Woodfine replied:
Cryptocurrency exchanges and professional traders can

benefit the most from Liquid right now, mostly for more
efficient arbitrage and asset management. It could also lead to
a more trust-minimized OTC [over the counter] market. Until
now, Bitcoin OTC markets have mostly relied on the respective
The underlying blockchain trust between its different participants. This limits the amount
framework of Liquid is of counterparties an OTC trader can deal with. With Liquid,
called Elements, which OTC traders can complete cryptographically enforced asset
is based on the Bitcoin swaps (L-BTC for USDt [t for Tether] for instance), minimizing
nonpayment risk without the need for a third-party escrow or
codebase and will be arbitrator.52
familiar to any experienced
blockchain developer. Therefore, the Liquid sidechain is now mostly used for its enhanced
financial capabilities within the Bitcoin ecosystem. Its potential is
far bigger: it’s not only a tool to make faster Bitcoin transactions,
but also a way to create, issue, and manage new digital assets.
The underlying blockchain framework of Liquid is called Elements,
which is based on the Bitcoin codebase and will be familiar to any
experienced blockchain developer. Elements is a comprehensive
platform to create new federated sidechains and blockchains, each
home to tokens that could represent any type of asset, such as
vouchers, currencies, bonds, or shares.53 The company Settlenet is
developing a product to facilitate the deployment, execution, and
trade of assets on the Liquid Network.54 Liquid is competitive since
it allows for complete privacy on a public blockchain by hiding the
amounts and types of assets being transferred by using confidential
transactions technology.
Tokenization is in vogue, thought of as one of the most promising

applications that emerged from a blockchain data structure. This new
phenomenon of extreme asset divisibility and transferability has been
attributed mostly to second-generation cryptocurrency protocols,
such as Ethereum. But users can now create and manage different
"Once the technology types of digital assets on top of Bitcoin-connected sidechains. As
behind Liquid is adopted Woodfine suggested:
by a wider share of the
cryptocurrency industry, Once the technology behind Liquid is adopted by a wider
this will demonstrate its share of the cryptocurrency industry, this will demonstrate
effectiveness and security." its effectiveness and security. With improved confidence, we
might start to see larger, more traditional enterprises adopt it.
The old guard of recognized and strongly established financial
NEIL WOODFINE corporations, such as the Goldman Sachs and J.P.Morgans of
Marketing Director the world, might begin to iterate on their current settlement
Blockstream technology and take a closer look at federated sidechains as a
solution. It’s absolutely possible for these organizations to set
up their own federation using the Elements framework, and
then work within their own kind of trusted network to provide
services based on this technology.55

Capabilities in development
In this section, we explore various technical improvements that
members of the community are exploring. Several enterprises such
as Fidelity Investments and Square have also been following these
improvements and how they will affect Bitcoin’s landscape.
Bitcoin is underappreciated Bitcoin is underappreciated in terms of its current capabilities and

in terms of its current ongoing development. Many observers misunderstand how Bitcoin
capabilities and ongoing can scale through second layers and sidechains. Many of the realistic
development. ideas and solutions from other blockchain development communities
could be working similarly on the Bitcoin blockchain in a few years,
once planned protocol improvements are implemented. We will
briefly explain what each of these improvements does technically
but will focus mostly on how they will affect scalability, privacy, and
programmability.
Scalability
Scalability is a huge limit in Bitcoin. Currently, its main blockchain
can support only seven transactions per second; in comparison,
Visa processes around 25,000 transactions per second and Alipay
supports 250,000 transactions per second (Figure 3).56
Although Bitcoin is destined to scale in superior layers (Figure 4, next

page), users can achieve optimization in the base layer. Technologies
Figure 3: Payment network throughput
Source of data: Raul Amoros, “Transactions Speeds: How Do Cryptocurrencies Stack Up to Visa or PayPal?” HowMuch.net,
FIXR Inc., 10 Jan. 2018. howmuch.net/articles/crypto-transaction-speeds-compared.

such as Schnorr signatures are potential solutions to increase

Bitcoin’s throughput. Schnorr signatures are an alternative digital
signature scheme to what Bitcoin currently uses, an elliptic curve
digital signature algorithm (ECDSA).57 The former technique is known
for its simplicity, which reduces the resources needed to compute
its cryptographic verification. Schnorr signatures are also smaller in
size. If Bitcoin shifted completely to using Schnorr signatures instead
of ECDSA, it could reduce its space consumption by 25 percent.
The technical The technical implementation of the Schnorr signatures technique
implementation of the used in Bitcoin is called MuSig; the name is derived from “multiple
Schnorr signatures signatures,” one of the most desired aspects of the technique.58
Basically, users can aggregate multiple signatures into one, while
technique used in Bitcoin
keeping the same properties of size and soundness.
is called MuSig; the name
is derived from “multiple Naturally, this use case fits perfectly with the multisignature
signatures,” one of the contracts found on the Bitcoin protocol. Andrew Poelstra, director
most desired aspects of the of research at Blockstream and co-author of the MuSig white paper,
technique. shared his view of the upcoming improvement:
First of all, they can combine all their private keys into one
key and then later, if they want to use a signature, they can
collaboratively produce a signature. Their combined key
is such that all the parties need to cooperate to produce
a signature. Then, what hits blockchain if they do that is a
single public key, which represents all the signers, and then a
single signature, which represents all the signers. And what’s
cool about this, you get a big scalability boost of course,
because that’s one key, one signature, no matter how many
participants there are.59
Figure 4: How Bitcoin layers work
© 2020 Veriphi. Adapted with permission. All rights reserved.

In the future, hundreds of signers will be able to collaboratively own

the keys to an amount of bitcoin, but the whole world will see only
one key, only one signature, and they will pay only a very small fee,
since the transactions will be limited in size. Simply put, Schnorr
signatures will improve the scalability of the Bitcoin blockchain.
Privacy
Enabled by Schnorr The Bitcoin Core developers, Pieter Wuille in particular, have recently
signatures, Taproot is a issued BIPs to introduce Schnorr signatures as part of the protocol.60
cryptographic technique The proposal is combined with a related technology called Taproot,
that would allow any which has taken the forefront of the announcement. Enabled by
possible Bitcoin smart Schnorr signatures, Taproot is a cryptographic technique that would
allow any possible Bitcoin smart contract to hide in plain sight on the
contract to hide in plain
Bitcoin blockchain. Basically, any transaction whose users wanted to
sight on the Bitcoin use Taproot would go through a final level of encryption that makes
blockchain. it identical to a legacy Bitcoin transaction, a pay-to-public-key hash
(P2PKH). The transaction appears to be a payment between two
users, not an advanced smart contract. All transactions could look
identical, whether they are Lightning Network channel creations,
multisignature contracts, a Liquid Network locking transaction,
regular transactions, and so forth.61
Also, Taproot enables the creation of a Merkelized abstract syntax

tree (MAST), which is a technology that allows a transaction to have
many conditional statements.62 You could have a transaction that has
different potential policies depending on the outcome, all of it hidden
behind the public key. Only when the conditions of a specific policy
are met will the script be exposed to the blockchain and the coins
spent. Poelstra described the effect this creates:
We get a tremendous privacy boost; we’re effectively able to

hide our spending policies and our scripts completely. This
gives people a lot of freedom to be using more complicated
scripts without revealing too much about their policies. ... It
will all look the same, and that’s the sort of exciting,
revolutionary thing about Taproot.63
If organizations are going to use public blockchain technologies in

production environments, they will need privacy embedded in the
If organizations are going protocols. Competing platforms have innovated in their complexity
to use public blockchain but seem to have forgotten the importance of privacy. “A lot of
the excitement around the Ethereum world is in the ability to very
technologies in production quickly deploy a very complex functionality, but in ways that are very
environments, they will non-scalable and very non-private,” Poelstra said. “So, in practice,
need privacy embedded in they’re unlikely to be usable at the scales and in a production setting
the protocols. that these entities are looking for.”64
We expect the core developers to add Taproot to the Bitcoin network

in the near future, though not before 2021 and with great care,
so that the change introduces no bugs and the network can reach
consensus on its adoption. Poelstra gave his thoughts on how large
organizations should view this situation:

I think a lot of these large banks—[and] large companies like

IBM, the Canadian government or any government really—
should look at the conservatism of Bitcoin and then look at
changes like Taproot, where we are making measurable, very
definite improvements in the areas of privacy and scalability,
but doing so in a way that’s technically conservative, that
makes a minimal amount of change without introduction new
cryptographic assumptions.65
We’ll explore some recent
and upcoming projects Programmability: Smart contracts
whose goal is to expand
We define programmability as the ease of using certain software
Bitcoin programmability. languages, cryptographic tools, and external links to real world
events to execute smart contracts. Most of the initial protocol
infrastructure of Bitcoin is rigid or inflexible in that regard. Satoshi
made the trade-off of flexibility for highly predictable and bug-free
code. Now, developers must work around these initial restrictions to
implement additional capabilities. Here we’ll explore some recent and
upcoming projects whose goal is to expand Bitcoin programmability.
Miniscript
Writing smart contracts on the Bitcoin network is a complex task;
very few people know how to use Bitcoin’s script language. A Bitcoin
script is the preestablished set of rules attached to a transaction
that the receiver must respect to be able to spend the bitcoins
locked by the script. The conditions a developer can include inside a
singular Bitcoin script are limited. Most bitcoin transactions follow a
simple model in which the sender does not include any complicated
conditions just to spend the funds.
Woman sitting at desk in front of coding computer screen by Kelly Sikkkema,

2019, used under Unsplash license.

In a mature financial system, however, users and especially

corporations must have sufficient tools to use their funds as they
please. This is where Miniscript can help. Miniscript is a new language
that standardizes the writing of Bitcoin scripts, which are lists of
instructions “recorded with each transaction that describe how the
next person wanting to spend the bitcoins being transferred can gain
access to them.”66 It was released in August 2019 by Pieter Wuille, a
Bitcoin core developer working at Blockstream.67 Operators of Bitcoin
Miniscript is a new software wallets might use the new language to offer users different
language that standardizes ways for constructing transactions and defining spending conditions.
the writing of Bitcoin Bitcoin wallet operators, custodians, and companies that offer other
bitcoin financial services might also use Miniscript to expand their
scripts.
features.
For example, Miniscript permits the creation of detailed and complex

spending policies. That capability is important for big corporations.
Currently, managing bitcoin funds inside a company can be quite
complicated, leading to losses if mismanaged. With Miniscript, if a
company has considerable cold storage reserves, it can establish a
certain threshold of board members who must agree on its moving
those reserves. This form of governance is traceable.
Discreet log contracts

Another programmability feature brought to Bitcoin through
innovative technical improvements is the discreet log contract (DLC).
This development in the field of smart contracts resulted from the
collaboration between two veterans in the Bitcoin industry, Crypto
Garage and Blockstream.
With DLCs, we can create a monetary contract outside the first layer
of Bitcoin. Before signing a contract, the parties to it agree not only
upon the conditions under which the contract will execute but also
upon the oracles—that is, the mutually trusted third-party sources of
information (e.g., the Bitcoin exchange rate)—from the contract pulls
data on the state of those conditions.68 Participants of the contract
commit to a mutual collateral with an initial “fund TX” as an incentive
The parties establish a to act honorably. Therefore, they establish a peer-to-peer (P2P)
peer-to-peer channel channel between them, and their contract automatically closes when
between them, and their the data it has pulled from oracles indicate that all conditions have
contract automatically been met.
closes when the data it has
Although the obvious applications of this technology are financial
pulled from oracles indicate
contracts such as options, futures, and derivatives, the possibilities
that all conditions have of this technology are endless. Consider managing escrow, where a
been met. third party holds an asset on behalf of two parties to a transaction.
Said Shuhei Mise, a consultant in the field:
By using discreet log contracts, enterprises are able to make

escrow transactions on top of the Bitcoin blockchain without
the need of a middleman. We can see a world where DLCs are
expanded to financial products or services that require escrow
transactions such as insurance, real-estate registration,
company liquidation, and any transactions or payments that

take a period of time. P2P Derivatives, [Crypto Garage’s]

open-source product based on DLCs, enables trust-minimized
derivative transactions between two parties. This will definitely
be a first step for future P2P cryptofinance products.69
Mise added that the goal isn’t necessarily to replace existing financial
systems, but to build an alternative infrastructure that could bring
about a new financial paradigm:
The goal isn’t necessarily
to replace existing financial We see a world where there is one unified platform for various
systems, but to build an types of assets that can be transacted without counterparty
alternative infrastructure risk. Blockchain is not here to replace the existing financial
that could bring about a infrastructure but instead give the end customer a choice
to conduct various types of financial transactions on a P2P
new financial paradigm. basis. Leveraging the core values of the Bitcoin blockchain
will be a start to realize this vision, and we are excited to
bring ourselves closer to this vision by defining the next
cryptofinance product and services.70
As we can see, innovators are advancing the use of smart contracts

on top of Bitcoin without compromising its security and value
proposition. These technical advancements are optional add-ons
to the existing protocol, and so no individual or corporate users of
the Bitcoin blockchain must adopt them. The responsibility of due
diligence falls upon those organizations that want to explore the use
of smart contracts.
Path to mass adoption

The improvements mentioned above only marginally improve the
scalability factor. Other methods, such as increasing block size, are
an obvious answer for many blockchains. If we wish to preserve
the desired values of immutability and censorship-resistance, we
must maintain a large decentralized network of nodes to enforce the
protocol rules. In 2018, a team working on Decentralized Identity at
Microsoft posted the following:
While some blockchain communities have increased on-chain

transaction capacity (e.g., block size increases), this approach
generally degrades the decentralized state of the network
and cannot reach the millions of transactions per second the
system would generate at world-scale. To overcome these
By pursuing second-layer technical barriers, we are collaborating on decentralized Layer
off-chain solutions, we can 2 protocols that run atop these public blockchains to achieve
harmonize scalability and global scale ... .71
network health. Many have arrived at that conclusion as well. By pursuing second-
layer off-chain solutions, we can harmonize scalability and network
health. The Lightning Network might resolve the “can’t buy coffee
with bitcoin” problem as well.72 It is a smart-contract system built
on top of Bitcoin. As an off-chain protocol, it excludes transactions
on the Bitcoin blockchain; those remain secure and decentralized
because of the smart contracts that enable it. It could broaden
Bitcoin’s transactional capabilities and create a new market
ecosystem.

Transactions on the Lightning Network occur between two network

peers and don’t need to implicate any other party.73 To begin, two
users—Alice and Bob—open a payment channel between them, each
depositing 2,000 satoshi (0.00000500 BTC) into a single two-of-two
multisignature contract.74 Upon confirmation on the blockchain, the
Lightning Network creates a payment channel where Bob and Alice
can transact the amount deposited in the contract. At any moment,
either party can take the last state of the channel, with the signature
The payment channels are in question from the other party, and claim it on the base layer of the
extremely flexible and fast. Bitcoin blockchain.
They enable micro amounts
to be sent instantaneously Let’s say Alice sends Bob three transactions of 500 satoshi each
(0.00000500 BTC, or ~$0.045), totaling 1,500 satoshi. Now Bob has
without a fee. 3,500 satoshi, and Alice is left with 500 of her initial 2,000 satoshi.
Bob takes the signature of the last state and broadcasts it to the
whole Bitcoin network. Only this last state goes into the blockchain,
not the three in between.75 Yet the validation of this state would
validate the three transactions between them (Figure 5).
Alice and Bob open a payment channel on the Lightning Network

by depositing 2,000 satoshi each into a two-of-two multisignature
contract. Alice sends Bob three transactions of 500 satoshi each. Bob
takes the signature of the last state and broadcasts it to the Bitcoin
network to show that Alice sent Bob 1,500 satoshi.
These payment channels are extremely flexible and fast. They enable
Alice and Bob to send micro amounts, such as a single satoshi (worth
$ 0.0000915380 as of 1 July 2020), to each other instantaneously
without a fee.76 That’s just between two users. The Lightning
Network can scale further. Let’s say Bob never closed the channel
nor broadcasted the last transaction to the whole network. Perhaps
Figure 5: Transactions on the Lightning Network

he opens a payment channel with Caroll, where Caroll deposits 0.5

BTC and Bob 0.5 BTC. Can Caroll send money to Alice, even if they’re
not directly connected through a payment channel?
Yes, through hash time locked contracts (HTLC), which are smart
contracts that allow parties to make one transaction conditional upon
another, where both transactions must clear within a period of time
or both fail. To send money to Alice, Caroll enters into an HTLC with
The Lightning Network Bob; the HTLC’s terms allow Bob to claim the 0.5 BTC if he can reveal
enables micropayments, the preimage (i.e., data that Caroll put through a hash function
which allow for Internet such as SHA-256) to a hash in question, where only Caroll knows
trade on a very small the preimage. Bob includes the same terms in an HTLC with Alice. If
Alice reveals the preimage to Bob, and Bob reveals it to Caroll, then
scale. Bitcoin enables Caroll initiates the payment to Bob, who must initiate payment with
P2P transactions with no Alice because he’s under the same terms in the HTLC with Alice. Now
intermediaries between imagine many such arrangements involving multiple parties hopping
parties, and Lightning payments through each other’s connections across the Lightning
allows for microtransactions. Network. In essence, that’s how the Lightning Network helps to scale
capacity of the Bitcoin blockchain.77
Use cases: Sparked by lightning

Currently, when conducting transactions online, most people
use credit cards, mainly Mastercard and Visa, through payment
processors such as Stripe or PayPal. As of 1 January 2020, Stripe
charges merchants 2.9 percent of every transaction plus a 30-
cent transaction fee.78 These charges obviously preclude any
microtransaction (worth pennies or fractions of pennies) that two
parties would wish to execute over the Internet.
Invented in 2015 and in production since early 2018, the Lightning

"The use case that is Network enables micropayments, which allow for Internet
my personal favorite is trade on a very small scale. Bitcoin enables P2P transactions
being able to pay content with no intermediaries between parties, and Lightning allows
producers for what they for microtransactions. Christian Decker, software engineer at
Blockstream, described the opportunities:
create without having
to go through the whole There are a couple of use cases that are currently not possible
advertisement system." on the Internet, such as machine-to-machine payments, or
having really low overhead payments on the Internet. The use
CHRISTIAN DECKER case that is my personal favorite is being able to pay content
Software Engineer producers for what they create without having to go through
Blockstream the whole advertisement system ... by simply saying I’m okay
with paying a cent for each minute that I consume, basically.79
Here’s how micropayments could work. Many news sites, including

The New York Times, limit the number of articles that site visitors
can read before they hit a paywall. They require readers to hand over
subscription fees and personal data, often paying for access to more
than they wanted. Consequently, many users leave the site without
subscribing to an overall subscription plan. These same readers

might have been willing to pay a small transaction fee per article.
The Lightning Network enables these types of applications and more.
In the coming years, organizations and entrepreneurs will find

many other use cases stemming from the ability to execute
microtransactions securely, cheaply, instantly, and without
intermediaries on the Internet. The Liquid Network, for example, has
massive scaling potential, since developers can build the Lightning
Network on top of it.
There are limits, however. The Lightning Network can transact only
funds that have been locked, and to route payments to users only
where there is a channel path with enough liquidity. Those limits are
intrinsic to the design of the network—a necessary tradeoff for its
functionality. However, other challenges such as the backup process
are harmful and can be surpassed.
In the coming years,

organizations and
entrepreneurs will
find many other use
cases stemming from
the ability to execute
microtransactions securely,
cheaply, instantly, and
without intermediaries on
the Internet.
Thunderstorm / lightning over railroad station by Denny Müller, 2019, used under
Unsplash license. Cropped.
On the base layer of Bitcoin, we must store only the private key
related to an address, to backup access to funds for future recovery.
The Lightning Network requires us to possess not only that private
key, but also the latest state of the Lightning channels to which
we are parties. If we broadcast a previous state to the whole
Bitcoin network as a closure of our Lightning channel, either we are
cheating—falsely claiming that the channel never updated—or we are
making a mistake by backing up only the previous state.
Unfortunately, the network cannot distinguish a cheater from

someone who is mistaken. Lightning has a punishment mechanism,
whereby the other party of the channel has a period—one week

by default—in which to reply. If that other party—the one who did

not publish the false claim or the mistake—publishes a state of the
channel that is more recent than the one published by the initial
party, and provides all the required proofs, then the initial party loses
all his funds to the other party. If the time period elapses without a
reply and correction, then the initial party’s claim holds.
To address this situation, Christian Decker and colleagues Paul

“Rusty” Russell and Olaoluwa Osuntokun came up with a solution,
Eltoo, which they intend to implement in the coming years.80 Eltoo
enables a smart-contract operation on the base layer of the Bitcoin
blockchain. In this situation, it would allow the second party to
replace the output of the broadcasting party, without recreating a
complete transaction. Decker described the solution:
We don’t have these issues with backups. If I forget

something, the only thing that can happen is basically that
you take a slightly bigger cut from the pie than what you
actually owned rather than you stealing my entire funds.
Suddenly, there’s a cost involved in me trying to cheat, but it’s
not deadly anymore.81
The punishment mechanism in Lightning limits the network to regular

Bitcoin transactions with two parties. Since Eltoo can remove the
punishment mechanism in the Lightning Network, we can add more
functionality such as multiparty channels. Decker explained:
It also allows you to have a couple of new use cases, and

one of them is true multiparty channels where you can have
individual contracts that could be of 15 or of 100 [users], and
you can actually move funds free[ly] between all of these
parties. One of the use cases that comes to mind for such
a system is an interbank settlement system where banks
basically have some funds inside of this system, and they can
freely move these funds around from bank to bank without
having to … have an external settlement system.82
We can already do transactions with different parties using HTLCs,

including with people who we aren’t directly connected to through
The Lightning Network a channel, but this improvement would allow for multiparty
transactions to happen all inside one channel.
technology has sparked a
lot of industry interest in
The Lightning Network technology has sparked a lot of industry
developing applications, interest in developing applications, new business models, and even
new business models, and new use cases. Even though the network is fully functional, and
even new use cases. businesses can use it today for instant transactions, much of the
work is still in development, with some use cases completely outside
of the monetary aspect. Recently, Joost Jager, a developer from
Lightning Labs, released an application that enables “end-to-end
encrypted … censorship-resistant, peer-to-peer instant messaging”
over the Lightning Network.83 Envisioning a decentralized WhatsApp,
he named it Whatsat.84

Pandora Core, an organization that takes a more academic approach

to the development of nonmonetary use cases, has recently
released a few white papers such as “Prometheus.”85 Leveraging
the various technologies part of the Bitcoin and Lightning protocol
stack, two parties could execute and settle an arrangement where
one pays another to compute a precise machine learning task in a
decentralized and trustless way. The computation isn’t done on the
network itself, but the transaction, the validation of the contract, and
The rate of innovation on the settlement all become possible through this technology stack.
the Lightning Network is It’s very ambitious, and Decker is optimistic: “They do have some
hard to match. excellent ideas and we’re talking about how we can realize some
of them as part of c-lightning [Blockstream’s implementation of
the lightning network concept written in the C language], so, yeah,
we’ll see how much of that works and how quickly we can get it
working.”86 The rate of innovation on the Lightning Network is hard to
match.
Implementation challenges
In addition to the challenges of scaling the transactional capacity,
preserving individual privacy and the confidentiality of enterprise
trade secrets, and programming smart contracts to automate more
deal terms, the Bitcoin blockchain faces a few challenges to its long-
term viability.
Unsustainable funding model

Because of the decentralized nature of the Bitcoin ecosystem,
funding has always been a challenge for the developers who
contribute time and code to the Bitcoin protocol and its other
applications. Unlike many other cryptocurrencies, there are no
funding streams coming directly from the protocol itself. Nobody is
directly compensated for working on Bitcoin. Bitcoin’s governance
also rules out the possibility for a “move fast and break things”
approach, sometimes characteristic of centralized decision-making.
On the other hand, Bitcoin’s slow and steady approach has allowed
Funding has always it to build up a world-class immune system for ten years, so it can
effectively fend off attacks.
been a challenge for the
developers who contribute Adherents to Cypherpunk ideology drove Bitcoin’s initial
time and code to the development. A form of digital money that allowed for pseudonymous
Bitcoin protocol and its and censorship-resistant payments was core to maintaining privacy
other applications. and personal liberty in an information age. Bitcoin’s open-source
model has encouraged those driven by this ideology and greater
preservation of these individual rights.
Skilled cryptographers, developers, and researchers have put

a tremendous amount of effort into Bitcoin without any official
compensation. They truly believed in their work, and so we might
infer that compensation for their efforts would come through the

appreciation in value of the underlying asset. Let’s not forget that

the initial block reward was 50 bitcoins per block, a huge incentive in
today’s dollar value. Those who got in early would want the Bitcoin
blockchain to succeed, and that would require ongoing development
of the protocols.
However, this model of funding, if it can even be called such a thing,

isn’t sustainable. The Bitcoin ecosystem can’t count on the endless
All the business models price appreciation of its native asset. Despite this, developers
developed around Bitcoin continue to contribute and continue to propose improvements.
depend on the strength of
its network and the value Free-rider problem
of its native coin.
The Bitcoin network is effectively permissionless, with extremely
low barriers to entry. This inclusiveness is a great feature, but it
can also fall prey to the free-rider problem. Many investors and
companies benefit from this public blockchain without paying for its
development. They should keep in mind that all the business models
developed around Bitcoin depend on the strength of its network and
the value of its native coin.
As Bitcoin’s importance in the market rises, so does the need for

companies operating in the space to help maintain its protocol. Many
already support such open-source projects as the Linux operating
system. For example, from 2015 to 2016, developers from Intel,
Red Hat, Linaro Ltd., Samsung, SUSE GmbH, IBM, and Renesas
Electronics contributed 36.7 percent of the code changes to the Linux
kernel.87 Why not contribute to the Bitcoin protocols as well?
Originators of other cryptocurrencies have either raised funds

through initial coin offerings or formed foundations to finance
developers of their respective protocols. Ethereum did both. Bitcoin’s
development has witnessed a growth that has been almost entirely
organic. The talented few working on it in the beginning were
motivated by its ethos, and not because it represented a job with a
stable income.
Caption this! by Tony Pham (@tonyphamvn), 2019, used under Unsplash license.
Cropped.

No dedicated marketing or public relations

A handful of companies have attempted to take control of Bitcoin, but
none has been able to do so. No one can speak for Bitcoin, and no
one entity can steer the development of its protocol in any direction.
It is truly a neutral form of money.
In September 2012, a few market actors formed the Bitcoin

No one can speak for Foundation with Gavin Andresen, Mark Karpeles, Jon Matonis, Patrick
Bitcoin, and no one entity Murck, Charlie Shrem, and Peter Vessenes on its board.88 It set
can steer the development out to raise funds for Bitcoin governance through donations and
of its protocol in any foundation memberships. By May 2014, it held $4 million in assets
direction. It is truly a and was spending $150,000 monthly on operations.89 But, by then,
a dark cloud had formed over the organization’s reputation: Shrem
neutral form of money. and Karpeles had both resigned—Shrem under allegations of money
laundering, and Karpeles after the hack and bankruptcy of his
exchange Mt. Gox.90 By April 2015, Andresen, Vessenes, and Matonis
had also vacated their seats, and newly elected board member
Olivier Janssens declared the foundation “effectively bankrupt.”91
Ultimately, the foundation never held much sway over the protocols,
unlike the Ethereum Foundation’s influence over Ethereum.92
What members and advocates of the Bitcoin protocols can do is to

encourage those talented individuals apt to bring benefits to the
Bitcoin code. Its nucleus of mindshare grows every day, allowing
more companies to build services on top of it and bring more
advantages to its users. This mindshare is limited, however. The
human capital dedicated to it must not lose its incentive and work on
other, more lucrative projects.
Just as the network itself is distributed, so too is the marketing.

Members of the community share and discuss information on
Bitcointalk, CryptocurrencyTALK, Twitter, Steemit, Reddit, and other
social media sites.93 This approach can be a drawback, since a larger
audience might struggle to grasp the essence of Bitcoin or screen out
misinformation in the space.
Trusted enterprise brands have the resources to support the bright

minds working on this open-source protocol, attract a greater
Over the span of ten years, clientele, and dispel rumors and myths about the technology.
Bitcoin has grown from a
worthless Internet geek
experiment to a network
capable of transacting Conclusions
nearly $2 billion per day.
Over the span of ten years, Bitcoin has grown from a worthless
Internet geek experiment to a network capable of transacting nearly
$2 billion per day.94 The dedication of its contributors and users to
the protocols and its creator’s ethos, as well as its ability to attract
and retain quality developers, has promoted innovation in the space
and assured its dominance as the most used and secure protocol.
It has also spurred the community’s push for more use cases and
improvements to its scalability, privacy, and programmability.

Second-layer solutions such as the Lightning Network allow for

instantaneous transactions because users conduct them outside
Bitcoin’s principle protocol layer. New business models, like Bitrefill’s
provision of instant liquidity for a fee to users of the Lightning
Network, are beginning to deliver user experiences comparable to
traditional instant payment methods.95
Sidechains are another important second-layer solution, allowing

New business models are greater flexibility in the use of Bitcoin technology. Liquid, an
beginning to deliver user implementation of sidechains created by Blockstream, allows users
experiences comparable to to create an entire system unrestrained by the rules implemented
traditional instant payment in Bitcoin’s main layer. It has its own set of rules, but since it is
pegged to Bitcoin it still benefits from Bitcoin’s security aspects while
methods. bringing greater confidentiality and the ability to issue any number of
assets.
Improvements such as Schnorr signatures permit a 25 percent

increase in the number of transactions included in every block.
Taproot, an application enabled by Schnorr, will allow greater
transactional privacy since all transactions, no matter how complex,
will look like any other regular transactions.
Bitcoin’s initial protocol design was optimized for security, reliability,

and predictable functioning. It is rigid in structure, but being a
digital asset preserves its nature as a programmable form of money.
However, Bitcoin script, used for single-key payments as well as to
represent the complex conditions required to release a transaction, is
cumbersome and difficult to verify. Miniscript makes writing complex
code easier in Bitcoin. It essentially abstracts away the complexity
involved in programming Bitcoin.
With these technologies, we could execute smart contracts without

intermediaries. Using adaptor signatures—which aren’t valid
signatures per se but a sort of promise about the valid signatures
to be used—we could exchange information protected by our
Building on top of cryptographic signature for bitcoins protected by our counterparty’s
an immutable, fully signature.96 The parties could display enough of their respective
distributed, and signatures to prove ownership so that the full exchange could occur.
Discreet log contracts would enable escrow transactions to take
decentralized protocol lets place on top of the Bitcoin blockchain without intermediaries by using
users and companies have oracles as the link between the blockchain and the external world.
the desired traceability and
authentication features These elements help maintain the robustness of the protocol
without incurring the costs over time. Building on top of an immutable, fully distributed, and
to building a blockchain decentralized protocol lets users and companies have the desired
traceability and authentication features without incurring the costs to
from scratch.
building a blockchain from scratch. They benefit from over a decade
of rigorous testing and development on a protocol that no one can
control, but all can exploit. Some of the features being developed,
such as allowing assets to be issued on a pegged sidechain or an
off-chain network permitting instantaneous transactions, present
numerous opportunities for companies entering the space.

Recommendations
Bitcoin is a unique experiment. Its ecosystem continues to expand
beyond any expectations. The idea of a decentralized digital currency
has been around since the infancy of the Internet, although the first
functioning protocol that managed to make it work only appeared in
2008 through a mysterious personage named Satoshi Nakamoto.
It is still quite early in
Bitcoin’s lifespan, in terms As improbable as it seems, Bitcoin’s market capitalization has topped
of taking a major place $160 billion.97 It’s an impressive sum, but it is still quite early in
in the world’s monetary Bitcoin’s lifespan, in terms of taking a major place in the world’s
systems. monetary systems.
Some said that the Bitcoin blockchain was the first manifestation
of blockchain technology and would likely be replaced by much
better cryptocurrencies or blockchain protocols.98 Yet none has
replaced Bitcoin. Instead, it has begun to scale and add features and
functionality without compromising its initial value propositions of
scarcity, censorship resistance, and decentralization. Companies are
building on it. Therefore, we recommend that business leaders and
technology officers learn about Bitcoin’s enterprise applications. Here
are some action items:
Create a dedicated Bitcoin research team. These individuals—

software engineers, cryptographers, mathematicians, and computer
engineers—must have a thorough understanding of the Bitcoin
protocol. A good example of this is Fidelity’s Digital Assets division,
which has been operating since 2018 after conducting research in
the space since 2014. They now have a full-service enterprise-grade
platform for storing, trading, and supporting eligible digital assets.
Establish a network of market participants within the Bitcoin

ecosystem. Bigger companies have been wandering around the
Bitcoin ecosystem and experimenting with its technology. Since
there is no corporate structure around the Bitcoin ecosystem,
the whole discussion of the technology takes place largely among
genuinely interested internal employees from those companies.
They understand its value and its culture. Executives can witness
these interactions on different social media platforms and at Bitcoin
conferences around the world.
The Bitcoin ecosystem will
If a corporation explores projects or commercial endeavors that
bring new opportunities genuinely and positively influence the Bitcoin ecosystem, then the
for the corporations network will embrace and encourage these projects. For example,
participating in it. Microsoft has been experimenting with the Bitcoin blockchain for
some time now, and the people developing these projects are active
in the Bitcoin community. This Bitcoin ecosystem will bring new
opportunities for the corporations participating in it.
Educate employees and partners about Bitcoin best practices.

Visa has supported initiatives for their employees to learn the
fundamentals of Bitcoin and the Lightning Network. Pierre Rochard,
a well-known Bitcoin advocate, hosted one such educational day.

Common good practices include:
» Using hardware wallets to generate your private key.

» Properly recording your seed phrase and avoiding sharing it
with others or having it on a device that has been connected
to the Internet.
» Running a Bitcoin full node to avoid being defrauded by
malicious actors, leaking personally identifiable information,
and achieving censorship-resistant payments.
» Creating a multisignature scheme and spreading them out
geographically to protect large amounts better.
» Using obfuscation methods to separate your identity from
your coins.
Consider adding Bitcoin to your portfolio. Grayscale, Digital

Currency Group’s investment branch, created a Bitcoin trust in
2013; it currently has $1.6 billion under management. The trust
issued publicly tradable shares representing a certain amount of
bitcoin so that institutional investors could diversify their portfolios
with cryptocurrency. Since its inception, it has generated a 1,674.5
percent return!
Galaxy Digital headed by Michael Novogratz, Pantera Capital led

To establish the best by Dan Morehead, and Fidelity Digital Assets with Tom Jessop as
avenues of exploration, president have all been investing in bitcoin, either offering custody
organizations should solutions or purchasing ramps to investors who want access to this
understand the Bitcoin asset class.
protocol before exploring
Develop pilots and business models using the Bitcoin
any special endeavor. protocol. Depending on their own industry and business model,
corporations should question whether they could improve their
internal processes by using the Bitcoin blockchain and developing
their own proof-of-concept pilots that would account for the current
and future transactional capabilities of the Bitcoin network. Perhaps,
once micropayments are fully functional, they could bring a new
customer base and increase conversion metrics. Or future smart-
contract capabilities built on top of a robust and decentralized
systems might permit the organization to reduce friction within
its internal processes. Only experts who can distinguish eventual
applications from technological mirages should develop proof-of-
concept projects. To establish the best avenues of exploration,
they should understand an overview of the Bitcoin protocol before
exploring any special endeavor.
Organizations must understand how the Bitcoin blockchain can serve

their transactional needs, provide proofs of information stored in an
immutable database, and create a communication network among
their departments or other partner organizations, in which they
would exchange ownership of certain assets or securities.

About the authors

Maciej Cepnik
Maciej Cepnik is a director of sales and marketing at Veriphi, a
Bitcoin solutions company based in Montreal. He is currently pursuing
a bachelor’s degree in commerce with a major in finances at the John
Molson School of Business. Maciej’s career in Bitcoin and blockchain
started in 2015 when he started a cryptocurrency fund that branched
out in a Bitcoin mining operation. He is also a prominent Bitcoin
speaker, having made several appearances at many conferences in
the provinces of Quebec and Ontario. A leader in his community,
Maciej is the co-organizer of the Bitcoin Montreal Meetup Group that
has close to 2,500 members. By coordinating and organizing multiple
events he understands well the needs for comprehensive Bitcoin
solutions.
René Vergé
René Vergé is a cybersecurity executive consultant, privacy lawyer,
and entrepreneur. He has held many senior executive roles in a
multitude of multinational firms, such as information security officer
at Bombardier, Desjardins, and senior director of consulting at
PricewaterhouseCoopers, CGI, and Fujitsu. He is now Veriphi’s legal
counsel and cybersecurity and privacy director. After serving in the
Canadian Armed Forces as a fighter pilot, René has been a member
of the Quebec Bar since 1993 and has pursued his graduate studies
at McGill University in information technology law. He holds the
patent CA 2890041, “Data Distribution Methods and Systems,” in
which he demonstrates secured and distributed data storage and
communication. He is also a CIPM (certified information privacy
manager) and a CIPP (certified information privacy professional) by
the IAPP (International Association of Privacy Professionals). René is
passionate about disruptive technologies such as Bitcoin and enjoys
traveling in his RV (recreational vehicle).
Gustavo Flores Echaiz

Gustavo Flores Echaiz is a technical bitcoin expert, a strategy
manager, and an entrepreneur. He currently holds the position
of director of product and research at Veriphi. He possesses in-
depth knowledge in Bitcoin, particularly in its software, hardware,
and market aspects. He is well regarded in the Bitcoin community,
particularly in Montreal where he is the main speaker of the advanced
series at the local meetup. Gustavo has a background in computer
science and has held several management roles in the retail industry
as well as in the Bitcoin industry, such as in Mining X and AMGTZ
Group Inc., a bitcoin mining operation and an investment portfolio
company respectively. He is also a certified bitcoin professional by
the C4. Gustavo is an avid supporter of free-market principles and
democratic human rights.

Tristan Borges Solari

Tristan Borges Solari is Veriphi’s co-founder and its finance and
operations director. He has experience in Bitcoin mining, having
operated a medium scale mining farm in 2018. His other experiences
include financial modeling and forecasting, implementing internal
controls, coordinating logistics, and creating and implementing
supply chain processes. Tristan has extensive knowledge in the
economics of Bitcoin, monetary theory, and strategic planning.
Tristan was president of the Concordia University Fintech Society.
He has obtained his bachelor’s degree in commerce at John Molson’s
School of Business, with a major in finance. He has also studied at
the University of Groningen in the Netherlands in capital allocation
and international financial management.
Disclosures
The authors of the paper are employees, directors, and shareholders
of Veriphi Inc., a Canadian company specializing in Bitcoin technology
and consultancy services. They are actively developing a hardware/
software solution and all have investments in Bitcoin. Veriphi has a
referral agreement with Knøx Custody.
Acknowledgments
We want to thank the following people for the interviews they
provided:
» Neil Woodfine, director of marketing at Blockstream
» Andrew Poelstra, director of research at Blockstream
» Christian Decker, software engineer at Blockstream
» Thibaud Maréchal, vice president of growth, Knøx
» Isabelle Bonnet, freelance consultant and blockchain expert,

Kering Group
» Shunichi Kimuro, head of corporate development, Crypto

Garage Inc.
» Justin Dhingra, chief cryptofinance officer, Crypto Garage Inc.
» Shuhei Mise, Crypto Garage Inc.
We would like to thank the Blockchain Research Institute and its

editorial team for giving us the opportunity to produce this document
and bring this research to light.

Notes
1. “Bitcoin: On-Chain Analysis,” CoinMarketCap.com, Binance Capital Management, as of
27 June 2020. coinmarketcap.com/currencies/bitcoin/onchain-analysis, accessed
27 June 2020.
2. “Satoshi Nakamoto” is a pseudonym for the person or persons who created the Bitcoin
protocols. See Benjamin Pirus, “Internet Pioneer Still Argues Bitcoin Creator Satoshi
Nakamoto Is This Obscure Mathematician,” Forbes, Forbes Media LLC, 30 May 2020.
tinyurl.com/yc2em5ds, accessed 21 June 2020. For a view of the message to which Pirus
refers, see developer Mike Hearn’s site, plan99.net/~mike/satoshi-emails/thread5.html.
3. “Bitcoin: A software-based online payment system,” managed by gavinandresen, jgarzik,
and sipa, SourceForge, Slashdot Media, n.d. sourceforge.net/p/bitcoin/mailman. It points
to GitHub: github.com/bitcoin/bitcoin.
4. Aaron Van Wirdum, “BIP 91 Has Locked In. Here’s What That Means (And What It Does
Not),” Bitcoin Magazine, BTC.com, 21 July 2017. bitcoinmagazine.com/articles/bip-91-has-
activated-heres-what-means-and-what-it-does-not; and Eric Lombrozo and Pieter Wuille,
“Segregated Witness (Peer Services),” BIP-144, GitHub.com, GitHub Inc., 8 Jan. 2016, last
commit 13 May 2019. github.com/bitcoin/bips/blob/master/bip-0144.mediawiki, accessed
21 June 2020.
5. Colin Harper, “Bitcoin Independence Day: How This Watershed Day Defines Community
Consensus,” Bitcoin Magazine, BTC.com, 1 Aug. 2019. bitcoinmagazine.com/articles/
bitcoin-independence-day-how-this-watershed-day-defines-community-consensus,
accessed 1 July 2020.
6. Christine Kim, “One Year Later, What’s Holding Back SegWit Adoption on Bitcoin?”
CoinDesk, Digital Currency Group, 17 Jan. 2019. www.coindesk.com/one-year-later-
whats-holding-back-segwit-adoption-on-bitcoin; and Danny Bradbury, “What the ‘Bitcoin
Bug’ Means: A Guide to Transaction Malleability,” CoinDesk, Digital Currency Group,
12 Feb 2014, updated 15 Feb 2014. www.coindesk.com/bitcoin-bug-guide-transaction-
malleability, accessed 21 June 2020.
7. Xiangfu Zhao, Zhongyu Chen, Xin Chen, and Yanxia Wang, “The DAO Attack Paradoxes
in Propositional Logic,” Conference Paper, 2017 4th International Conference
on Systems and Informatics, Nov. 2017. ResearchGate, www.researchgate.net/
publication/322320687_The_DAO_attack_paradoxes_in_propositional_logic, accessed
14 March 2020.
8. Ameer Rosic, “What is Ethereum Classic? Ethereum vs Ethereum Classic,” Blockgeeks,
Blockgeeks Inc., 2017. blockgeeks.com/guides/what-is-ethereum-classic, accessed
21 June 2020.
9. “Hard Fork News,” Cointelegraph, last updated 18 June 2020. cointelegraph.com/tags/
hard-fork, accessed 21 June 2020.
10. Saifedean Ammous, The Bitcoin Standard: The Decentralized Alternative to Central
Banking (Hoboken, NJ: John Wiley & Sons Inc., 2018): xvi. tinyurl.com/y93gxvy4,
accessed 21 June 2020.
11. Saifedean Ammous, The Bitcoin Standard.
12. Danny Ryan et al., “Ethereum 2.0 Specifications,” GitHub.com, GitHub Inc., last commit
25 June 2020. github.com/ethereum/eth2.0-specs, accessed 26 June 2020.
13. jgarzik (Jeff Garzik), “Strange block 74638,” Bitcoin Discussion, BitcoinTalk.org, powered
by Simple Machines, 15 Aug. 2010, 06:08:49 PM. bitcointalk.org/index.php?topic=822.0;
and lfm, “Overflow Bug SERIOUS,” Development and Technical Discussion, BitcoinTalk.
org, powered by Simple Machines, 15 Aug. 2010, 07:04:11 PM. bitcointalk.org/index.
php?topic=823.0, both accessed 25 June 2020.
14. Gavin Andresen (08:39:42 PM) and Satoshi (09:40:19 PM), “Re: Overflow Bug SERIOUS,”
Development and Technical Discussion, BitcoinTalk.org, powered by Simple Machines,
15 Aug. 2010. bitcointalk.org/index.php?topic=823.0, accessed 25 June 2020.
15. Charlie Shrem, “Bitcoin’s Biggest Hack in History: 184.4 Billion Bitcoin from Thin Air,”
Hackernoon, Artmap Inc., 11 Jan. 2019. hackernoon.com/bitcoins-biggest-hack-in-history-
184-4-ded46310d4ef, accessed 25 June 2020.
16. Nozomi Hayase, “Bitcoin’s Scaling Challenge Brings the Battle for Liberation of
Cyberspace,” Bitcoin Magazine, BTC Inc., 18 Dec. 2017. bitcoinmagazine.com/articles/op-
ed-bitcoins-scaling-challenge-brings-battle-liberation-cyberspace, accessed
14 March 2020.
17. Nathan Reiff, “A History of Bitcoin Hard Forks,” Investopedia, Dotdash/About Inc., 25 June
2019. www.investopedia.com/tech/history-bitcoin-hard-forks, accessed 25 June 2020.

18. Barry M. Leiner, Vinton G. Cerf, David D. Clark, Robert E. Kahn, Leonard Kleinrock,
Daniel C. Lynch, Jon Postel, Larry G. Roberts, and Stephen Wolff, “The Initial Internetting
Concepts,” Brief History of the Internet, 1997. www.internetsociety.org/internet/history-
internet/brief-history-internet, accessed 21 June 2020.
19. Barry M. Leiner et al., “Proving the Ideas,” Brief History of the Internet, 1997. www.
internetsociety.org/internet/history-internet/brief-history-internet, accessed
21 June 2020.
20. Eric Hughes, “A Cypherpunk’s Manifesto,” 9 March 1993 www.activism.net/cypherpunk/
manifesto.html, accessed 21 June 2020.
21. William Foxley, “Zcash’s Funding Vote and the Woes of Decentralized Governance,”
CoinDesk, Digital Currency Group, 1 Feb. 2020, updated 12 June 2020. www.coindesk.
com/zcashs-funding-vote-and-the-problems-with-decentralized-governance, accessed
21 June 2020.
22. “About,” Scaling Bitcoin, Scaling Bitcoin Workshop Group, n.d. scalingbitcoin.org/about.
23. Bryan Bishop on Twitter:@kanzure, Twitter post, 27 June 2019, 10:32 AM. twitter.com/
kanzure/status/1144252170956619777, accessed 14 March 2020.
24. Scaling Bitcoin, Scaling Bitcoin Workshop Group, Tel Aviv 2019.
telaviv2019.scalingbitcoin.org.
25. David Adler, “Silk Road: The Dark Side of Cryptocurrency,” Fordham Journal of Corporate
and Financial Law, Fordham University School of Law, 21 Feb. 2018. news.law.fordham.
edu/jcfl/2018/02/21/silk-road-the-dark-side-of-cryptocurrency/#_edn48, accessed
21 June 2020.
26. Tim Hume, “How FBI Caught Ross Ulbricht, Alleged Creator of Criminal Marketplace Silk
Road,” CNN.com, Cable News Network, Turner Broadcasting System Inc., 5 Oct. 2013.
www.cnn.com/2013/10/04/world/americas/silk-road-ross-ulbricht/index.html, accessed
21 June 2020.
27. “2020 Crypto Crime Report,” Chainalysis.com, Chainalysis, Inc., 2020. go.chainalysis.
com/2020-Crypto-Crime-Report.html, accessed 14 March 2020.
28. “Adamant Fund I is a Bitcoin Alpha Fund,” Adamant Capital LP, n.d. www.
adamantcapitalfund.com/about; and Ria Bhutoria, “Institutional Digital Asset Survey,”
Report, Fidelity Digital Asset Services LLC, 15 June 2020. www.fidelitydigitalassets.com/
articles/institutional-digital-asset-survey-report, accessed 21 June 2020.
29. NRS, “Chapter 719 - Electronic Transactions (UNIFORM ACT),” www.leg.state.nv.us/
NRS/NRS-719.html; 44-7061, “Signatures and Records Secured Through Blockchain
Technology: Smart Contracts; Ownership of Information; Definitions,” www.azleg.gov/
ars/44/07061.htm; and “Bill Status H.868 (Act 157),” Vermont Legislature. legislature.
vermont.gov/bill/status/2016/H.868, accessed 13 March 2020.
30. “Blockchain et Preuve: La Chine en Pointe,” Actualités du Droit, 7 Sept. 2018. www.
actualitesdudroit.fr/browse/tech-droit/blockchain/15571/blockchain-et-preuve-la-chine-
en-pointe, accessed 13 March 2020.
31. “Hash Rate of Bitcoin Network,” Blockchain.com, Blockchain Luxembourg SA. www.
blockchain.com/charts/hash-rate, accessed 13 March 2020.
32. “Bitmain,” m.bitmain.com; “Rate L: Industrial Rate for Large-Power Customers,” Hydro-
Québec, at a rate of $0.03 per kilowatt hour as of 13 March 2020. www.hydroquebec.
com/business/customer-space/rates/rate-l-industrial-rate-large-power-customers.
html; and “Convert CAD/USD,” XE.com, XE.com Inc., 6 March 2020. www.xe.com/
currencyconverter/convert/?Amount=1&From=CAD&To=USD.
33. “Bitcoin’s Block Timestamp Protection Rules,” BitMEX Blog, BitMEX, 30 Oct. 2019. blog.
bitmex.com/bitcoins-block-timestamp-protection-rules, accessed 13 March 2020.
34. “ACCIONA uses blockchain to secure its energy management software,” Press Release,
Acciona SA, 11 June 2020. www.acciona.com/pressroom/news/2020/june/acciona-uses-
blockchain-to-secure-its-energy-management-software; “With its new subsidiary, Exaion,
EDF is launching an eco-responsible digital offering specialising in blockchain projects,”
Press Release, EDF Group, Electricité de France, 6 Feb. 2020. www.edf.fr/en/edf/with-its-
new-subsidiary-exaion-edf-is-launching-an-eco-responsible-digital-offering-specialising-
in-blockchain-projects; “Sourcing Sustainably: Tracing Materials Through Technology,”
Sustainability Progress Report 2017–2020, Kering SA, 30 Jan. 2020. progress-report.
kering.com/home/discover-create/create/tracing-materials-through-technology; “Servier
Joins Embleema’s Blockchain Health Consortium to Launch a Pilot Project for Blockchain,”
Press Release, Servier Laboratories, 12 April 2018. servier.com/en/communique/servier-
joins-embleemas-blockchain-health-consortium-to-launch-a-pilot-project-for-blockchain;
and “Woleet Solutions Available for All Industries,” Woleet.io, n.d. www.woleet.io/
solutions, all accessed 30 June 2020.

35. OpenTimestamps, GitHub.com, GitHub Inc., last commit 1 Sept. 2018. github.
com/opentimestamps/opentimestamps-client/blob/master/README.md; Wayne
Vaughan, Jason Bukowski, and Shawn Wilkinson, “Chainpoint,” White Paper v2.1.0,
GitHub.com, GitHub Inc., 31 Aug. 2016. github.com/chainpoint/whitepaper/blob/
dc3ed3be9d172934c95340d3a3063934bd6a154b/chainpoint_white_paper.pdf, accessed
25 June 2020.
36. “KER:EN Paris Stock Quote,” Kering SA, YCharts, as of 29 June 2020. ycharts.com/
companies/PPRUY/market_cap.
37. Isabelle Bonnet, interviewed via video telephone by Maciej Cepnik, 24 Jan. 2020.
38. “Blockchain FAQ,” Ulysse-Nardin.com, Ulysse Nardin SA, n.d. www2.ulysse-nardin.com/
blockchain-faq, accessed 29 June 2020.
39. Isabelle Bonnet, interviewed via video telephone by Maciej Cepnik, 24 Jan. 2020.
40. Kimberly Amadeo, “Inflation Targeting and How It Works,” The Balance, Dotdash/About
Inc., updated 10 July 2019. www.thebalance.com/inflation-targeting-definition-how-it-
works-3305854#, accessed 27 June 2020.
41. Ian Webster, “1800 dollars in 2020,” Inflation Calculator, OfficialData.org, Official Data
Foundation/Alioth LLC, updated 11 June 2020. www.officialdata.org/us/inflation/1800,
42. SFOX, “Was Bitcoin a Good Buy in 2019?” The SFOX Crypto Market Report, December
2019, 7 Jan. 2020. blog.sfox.com/bitcoin-2019-performance-returns-correlations-
volatility-year-end-review-a15fe460c90, accessed 14 March 2020.
43. John Dantoni, “Examining the landscape of digital asset custody,” The Block, The Block
Crypto Inc., 23 Jan. 2020. www.theblockcrypto.com/genesis/53485/examining-the-
landscape-of-digital-asset-custody, accessed 14 March 2020.
44. Isabelle Kirkwood, “Knøx Raises $8.25 Million, Launches New Digital Asset Custody
Service,” Betakit, 24 Sept. 2019. betakit.com/knox-raises-8-25-million-launches-new-
digital-asset-custody-service, accessed 14 March 2020.
45. Thibaud Maréchal, interviewed via telephone by Gustavo J. Flores Echaiz, 1 Feb 2020.
46. Thibaud Maréchal, interviewed via telephone by Gustavo J. Flores Echaiz, 1 Feb. 2020.
47. Adam Back, Matt Corallo, Luke Dashjr, et. al., “Enabling Blockchain Innovations with
Pegged Sidechains,” White Paper, Blockstream.com, Blockstream Corp. Inc.,
22 Oct. 2014. blockstream.com/sidechains.pdf, accessed 14 March 2020.
48. Samson Mow, “Tether Lands on the Liquid Network,” White Paper, Blockstream.com,
Blockchain Corp. Inc., 29 July 2019. blockstream.com/2019/07/29/en-tether-lands-on-
the-liquid-network; “Use Cases,” RSK Labs, n.d. www.rsk.co/Use-cases; and Jimmy Aki,
“CoinShares, Blockchain Launches ‘Digital Gold’ Token on Bitcoin Sidechain,” Bitcoin
Magazine, BTC.com, 15 Oct. 2019. bitcoinmagazine.com/articles/coinshares-blockchain-
launches-digital-gold-token-on-bitcoin-sidechain, accessed 13 March 2020.
49. Neil Woodfine, interviewed via telephone by Gustavo J. Flores Echaiz, 14 Jan. 2020.
50. Jonas Nick, Andrew Poelstra, and Gregory Sanders, “Liquid: A Bitcoin Sidechain,” White
Paper, Blocksteam.com, Blockstream Corp. Inc., 22 May 2020. blockstream.com/assets/
downloads/pdf/liquid-whitepaper.pdf, accessed 16 June 2020.
51. Liquid Federation Members, Blocksteam.com, Blockstream Corp. Inc., n.d. blockstream.
com/liquid, accessed 16 June 2020.
The t in USDt stands for Tether.
53. “How It Works,” Elements by Blockstream, n.d. elementsproject.org/how-it-works,
accessed 1 July 2020.
54. “SETTLENET.io,” Crypto Garage Inc., n.d. settlenet.io, accessed 14 March 2020.
56. Raul Amoros, “Transactions Speeds: How Do Cryptocurrencies Stack Up to Visa
or PayPal?” HowMuch.net, FIXR Inc., 10 Jan. 2018. howmuch.net/articles/crypto-
transaction-speeds-compared; Alipay, Twitter.com, 10 Nov. 2017, 6:09 PM. twitter.com/
alipay/status/929123909970153472?lang=hi; and “Binance 2018 Recap,” Binance Blog,
30 Dec. 2018. www.binance.com/ua/blog/286445971261435904/Binance-2018-Recap,
accessed 14 March 2020.
57. Information Technology Laboratory, “The Elliptic Curve Digital Signature Algorithm
(ECDSA),” Digital Signature Standard (DSS), foreword by Charles Romine, National
Institute of Standards and Technology, Federal Information Processing Standards, FIPS
PUB 186-4, Gaithersburg, July 2013, pp. 26–31. nvlpubs.nist.gov/nistpubs/FIPS/NIST.
FIPS.186-4.pdf, accessed 22 June 2020.

58. Gregory Maxwell, Andrew Poelstra, Yannick Seurin, and Pieter Wuille, “Simple Schnorr
Multisignatures with Applications to Bitcoin,” IACR.org, International Association for
Cryptologic Research, 15 Jan. 2018, revised 20 May 2018. Cryptology ePrint Archive,
eprint.iacr.org/eprint-bin/getfile.pl?entry=2018/068&version=20180520:191909&file=068.
pdf, accessed 25 June 2020.
59. Andrew Poelstra, interviewed via video telephone by Gustavo J. Flores Echaiz,
27 Jan. 2020.
60. Pieter Wuille, Jonas Nick, and Anthony Towns, “Taproot: SegWit Version 1 Spending
Rules,” BIP-341, GitHub.com, GitHub Inc., 19 Jan. 2020, last commit 15 May 2020. github.
com/bitcoin/bips/blob/master/bip-0341.mediawiki, accessed 21 June 2020.
61. Artillar, “Pay-to-PubKey Hash,” edited by Gtabmx and Hellgirl34, BitcoinWiki.org, a
community project, last edited 4 Feb. 2020. en.bitcoinwiki.org/wiki/Pay-to-Pubkey_Hash,
62. Jeremy Rubin, Manali Naik, and Nitya Subramanian, “Merkelized Abstract Syntax Trees,”
White Paper, 16 Dec. 2014. rubin.io/public/pdfs/858report.pdf, accessed 27 June 2020.
27 Jan. 2020.
27 Jan. 2020.
27 Jan. 2020.
66. Norill, “Script,” Bitcoin Wiki, 21 June 2014, last revised by Furunodo 27 June 2020.
en.bitcoin.it/wiki/Script#, accessed 27 June 2020.
67. Pedro Febrero, “What Is Bitcoin Miniscript and How Does It Work?” CoinRivet.com,
Coin Rivet Ltd., 5 Sept. 2019. coinrivet.com/guides/cryptocurrencies/what-is-bitcoin-
miniscript-how-it-works/#, accessed 27 June 2020.
68. Jon Buck, “Blockchain Oracles, Explained,” Cointelegraph, 18 Oct. 2017. cointelegraph.
com/explained/blockchain-oracles-explained, accessed 13 March 2020.
69. Shuhei Mise, interviewed via e-mail by Gustavo J. Flores Echaiz, 21 Jan. 2020. See also
“P2P Derivatives,” Crypto Garage Inc., n.d. cryptogarage.co.jp/p2pd.
70. Shuhei Mise, interviewed via e-mail by Gustavo J. Flores Echaiz, 21 Jan. 2020.
71. Alex Simons, “Decentralized Digital Identities and Blockchain: The Future as We See
It,” Microsoft 365 Blog, Microsoft Corp., 12 Feb. 2018. www.microsoft.com/en-us/
microsoft-365/blog/2018/02/12/decentralized-digital-identities-and-blockchain-the-
future-as-we-see-it, accessed 14 March 2020.
72. Paul Vigna, “Why You Won’t Be Buying a Coffee with Bitcoin Anytime Soon,” The Wall
Street Journal, Dow Jones & Co., 2 July 2017. www.wsj.com/articles/why-you-wont-be-
buying-a-coffee-with-bitcoin-anytime-soon-1498996800, accessed 14 March 2020.
73. Elizabeth Stark, “What Is the Lightning Network and How Can It Help Bitcoin Scale?”
CoinCenter.org, Coin Center, 15 Sept. 2016. www.coincenter.org/education/key-concepts/
lightning-network, accessed 1 July 2020.
74. Ben Davenport, “What is Multi-Sig, and What Can It Do?” CoinCenter.org, Coin Center, 1
Jan. 2015. coincenter.org/entry/what-is-multi-sig-and-what-can-it-do, accessed
1 July 2020. “Multisignature,” Bitcoin Wiki, 25 Nov. 2019. en.bitcoin.it/wiki/Multisignature,
accessed 14 March 2020.
75. Todor Nikolov, “The Promise of Lightning Network ATMs,” Coin ATM Radar, 4 Dec. 2019.
coinatmradar.com/blog/the-promise-of-lightning-network-atms, accessed 14 March 2020.
76. Satoshi-USD converter, 99bitcoins.com, accessed 3 March 2020.
77. For an excellent explanation of the Lightning Network and hash time locked contracts,
see Rusty Russell’s three-part blog series: “Lightning Networks Part I: Revocable
Transactions,” Rusty Russell's Coding Blog, OzLabs.org, 30 March 2015. rusty.ozlabs.
org/?p=450; “Lightning Networks Part II: Hashed Timelock Contracts (HTLCs),”
1 April 2015. rusty.ozlabs.org/?p=462; and “Lightning Networks Part III: Channeling
Contracts,” 6 April 2015. rusty.ozlabs.org/?p=467, accessed 16 June 2020.
78. “Pricing & fees, Canada,” Stripe, n.d. stripe.com/en-ca/pricing, accessed 14 March 2020.
79. Christian Decker, interviewed via video telephone call by Gustavo J. Flores Echaiz,
24 Jan. 2020.
80. Christian Decker, Rusty Russell, and Olaoluwa Osuntokun, “eltoo: A Simple Layer2
Protocol for Bitcoin,” White Paper, Blockstream.com, Blockstream Corporation Inc.,
28 Feb. 2017, modified 2 May 2018. blockstream.com/eltoo.pdf, accessed 13 March 2020.
24 Jan. 2020.

24 Jan. 2020.
83. Joost Jager, “Whatsat,” GitHub.com, GitHub Inc., last committed 25 Dec. 2019. github.
com/joostjager/whatsat, accessed 26 June 2020.
84. Joost Jager, “Whatsat.”
85. Maxim Orlovsky and Sabina Sachtachtinskagia, “Prometheus: Scalable High-load
Computing and Machine Learning on Top of Bitcoin,” White Paper, GitHub.com, GitHub
Inc., last committed 24 Feb. 2019. github.com/pandoracore/prometheus-spec/blob/
master/prometheus.pdf, accessed 14 March 2020.
24 Jan. 2020.
87. “The Top 10 Developers and Companies Contributing to the Linux Kernel in 2015-2016,”
The Linux Foundation, 22 Aug. 2016. www.linuxfoundation.org/blog/2016/08/the-top-10-
developers-and-companies-contributing-to-the-linux-kernel-in-2015-2016, accessed
16 June 2020.
88. Jon Matonis, “Bitcoin Foundation Launches to Drive Bitcoin’s Advancement,” Forbes,
Forbes Media LLC, 27 Sept. 2012. www.forbes.com/sites/jonmatonis/2012/09/27/bitcoin-
foundation-launches-to-drive-bitcoins-advancement/#1d92cd9d8683, accessed
16 June 2020.
89. Pete Rizzo, “Bitcoin Foundation Holds $4 Million in Bitcoin, Spends $150k Each Month,”
CoinDesk, Digital Currency Group, 21 May 2014, updated 10 Sept. 2014. www.coindesk.
com/bitcoin-foundation-4-million-spends-150000-each-month, accessed 16 June 2020.
90. Emily Spaven, “Charlie Shrem Resigns from Bitcoin Foundation Following Silk Road
Arrest,” CoinDesk, Digital Currency Group, 28 Jan. 2014, updated 14 May 2015. www.
coindesk.com/charlie-shrem-resigns-bitcoin-foundation-silk-road-arrest; and “Mark
Karpeles, Former CEO, Mt. Gox,” CoinDesk, Digital Currency Group, n.d. www.coindesk.
com/people/mark-karpeles, accessed 16 June 2020.
91. Aaron Van Wirdum, “Bitcoin Foundation Is ‘Effectively Bankrupt,’” Cointelegraph,
4 April 2015. cointelegraph.com/news/bitcoin-foundation-is-effectively-bankrupt,
92. Nermin Hajdarbegovic, “Bitcoin Foundation Members Exit Following Election Controversy,”
CoinDesk, Digital Currency Group, 12 May 2014. www.coindesk.com/bitcoin-foundation-
members-resign-following-controversial-appointment, accessed 13 March 2020.
93. Dan Price, “The 10 Best Online Crypto Sites, Forums, and Communities,” Blocks Decoded,
MakeUseOf Ltd., 17 March 2020. blocksdecoded.com/best-online-crypto-communities,
94. “Estimated USD Transaction Value,” Blockchain.com, Blockchain Luxembourg SA, as of
14 March 2020. www.blockchain.com/charts/estimated-transaction-volume-usd, accessed
14 March 2020.
95. “Thor Recharge,” Bitrefill, n.d. www.bitrefill.com/buy/lightning-recharge/?hl=en; Bitrefill,
“How to Earn Bitcoin on the Lightning Network,” Bitrefill Blog, Medium Corp., 23 March
2020. blog.bitrefill.com/how-to-earn-bitcoin-on-the-lightning-network-b27431136dc7,
96. For more on adaptor signatures, see Adam Gibson, “Flipping the Scriptless Script on
Schnorr,” waxwing’s blog, joinmarket.me, Nov. 2017. joinmarket.me/blog/blog/flipping-
the-scriptless-script-on-schnorr, accessed 16 June 2020.
97. $167,387,475,210 as of 3 July 2020, according to CoinMarketCap.com.
98. Here’s an example of such a prediction: Ben Dyson, “Bitcoin’s 3 Fatal Design Flaws,”
Positive Money, Positive Money Ltd., 5 April 2014. positivemoney.org/2014/04/bitcoins-
fatal-design-flaws, accessed 16 June 2020.

blockchainresearchinstitute.org

Cepnik A+New+Look+at+the+Bitcoin+Blockchain Blockchain+Research+Institute

Uploaded by

Copyright:

Available Formats

Cepnik A+New+Look+at+the+Bitcoin+Blockchain Blockchain+Research+Institute

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Cepnik A+New+Look+at+the+Bitcoin+Blockchain Blockchain+Research+Institute

Uploaded by

Copyright:

Available Formats

A NEW LOOK AT THE BITCOIN BLOCKCHAIN

How Innovation in Bitcoin’s Technology Stack

Maciej Cepnik, Gustavo J. Flores Echaiz,

A BLOCKCHAIN RESEARCH INSTITUTE BIG IDEA WHITE PAPER

Realizing the new promise of the digital economy

Our global team of blockchain experts is dedicated to exploring,

Our findings, conclusions, and recommendations are initially proprietary to

Don Tapscott — Co-Founder and Executive Chairman

Others in the BRI leadership team

Alisa Acosta — Director of Education

Because of these implementation challenges, enterprise leaders have

By building directly on top of the existing Bitcoin infrastructure,

3 © 2020 BLOCKCHAIN RESEARCH INSTITUTE

» Applications for business include timestamping—inserting

» Important capabilities are in development to address the

» Unlike many other cryptocurrencies, there are no funding

4 © 2020 BLOCKCHAIN RESEARCH INSTITUTE

development structure of Bitcoin has remained horizontal—no

This is the case for non-protocol changes. When the protocol is

Through this process, the community can unequivocally approve any

5 © 2020 BLOCKCHAIN RESEARCH INSTITUTE

Forks: The nature of blockchain software upgrades

To improve an existing cryptocurrency system, developers implement

Hard forking is a more drastic way to modify a cryptocurrency

6 © 2020 BLOCKCHAIN RESEARCH INSTITUTE

fundamentally different that any part of the network that doesn’t

After much debate, the Bitcoin community decided that modifying

Developers and stakeholders of other cryptocurrencies and

These core developers have resolved countless bugs and made

7 © 2020 BLOCKCHAIN RESEARCH INSTITUTE

that addressed the problem and restored the Bitcoin blockchain to a

As more backward-compatible changes are implemented in the

Table 1: Bitcoin by the numbers

Price $9,069.56 $217.03 $222.42 $5.60

Circulating supply 18,416,420 18,433,761 111,527,930 120,713,020

Sent last 24h $6,347,734,881 $104,368,461 $404,893,300 $7,840,940

Source of data: BitInfoCharts.com, accessed 27 June 2020 18:45 EST.

8 © 2020 BLOCKCHAIN RESEARCH INSTITUTE

Every modern application, website, or computer-based

In contrast, development teams of other cryptocurrencies have

The lack of capital dedicated to Bitcoin development makes attracting

This base has evolved throughout Bitcoin’s history, as different

Figure 1: Bitcoin protocols: Base layer of the Internet of Value

© 2020 Veriphi. Adapted with permission. All rights reserved.

9 © 2020 BLOCKCHAIN RESEARCH INSTITUTE

Digital Assets, Microsoft, and Bakkt have financed researchers from

The conference itself is continuously growing and raising interest

Figure 2: Bitcoin hash rate distribution

10 © 2020 BLOCKCHAIN RESEARCH INSTITUTE

pages of #bitcoin research papers and proposals for @scalingbitcoin

But as the Bitcoin ecosystem grows, the business models constructed

Applications for business

A lot has changed since then. According to Chainalysis, criminal

Bitcoin is also very effective in transferring large amounts of value

11 © 2020 BLOCKCHAIN RESEARCH INSTITUTE

This type of financial usage is more frequent and varied. A lending

One of the most desired Timestamping

The question is whether the blockchain used is truly immutable and

Footprint Mark Seals Timestamp Authenticity Former by claude alleva