Ever since Bitcoin was created in 2009 by Satoshi Nakamoto, it has largely been pushed aside by the traditional financial services industry and the institutional space. A similar attitude has been displayed towards most cryptocurrencies and digital assets, based on fear and the fact that very little was known about these new “actors” in the industry. Now that they are gaining traction and have received the attention of millions of investors, lawmakers and governments are beginning to address the question of regulation for these virtual currencies.

This war between the institution and the new wave of digital assets has been going on for years. However, it seems like we are noticing a shift in mentality and approach from the institutional space towards bitcoin. More and more financial organizations are changing their opinion about the first-ever virtual peer-to-peer currency and have developed interest in these new forms of potentially lucrative investments for their loyal customers.

In this brief overview, we will see how the tide is turning for bitcoin and how it is becoming one of the most sought-after assets by large and reputable financial firms all across the globe. In turn, we will demonstrate how this could eventually lead to the crypto markets regaining their strengths and how we might be on the cusp of one of the largest bitcoin bull runs in history.

Some recent events and news have been very positive for bitcoin and its slow but steady breakthrough within the institutional space. Institutional investors refer to large entities such as banks, hedge funds, insurance companies, investment groups and more. The first major news that has been affecting the space as of recently and that showcases bitcoin’s growing position within the institutional markets is the upcoming (and recently delayed) decision by the U.S. Securities and Exchange Commission (SEC) regarding the approval of a bitcoin exchange-traded fund (ETF).

An ETF is a fund that represents an asset’s value and that is traded directly on the stock market. They are considered passive investments.

In the recent weeks, the cryptocurrency community, as well as actors in the institutional space and even some members of the SEC, have been strongly advocating for the creation of a bitcoin ETF. This truly shows that there is a heavy desire from financial firms and large investors to join the cryptocurrency trend.

Another recent report by Forbes has stated that the Northern Trust, a financial services firm that has close to $10.7 trillion in assets under custody, has opened their doors to companies involved in the crypto space. In addition, the firm is supporting multiple blockchain-based projects. Moreover, Northern Trust’s President, Pete Cherecwich says he believes in a tokenized economy and future.

The Intercontinental Exchange (ICE), parent company of the New York Stock Exchange, has announced that it will be launching a new company called Bakkt which aims “to create an open and regulated, global ecosystem for digital assets”. It will enable big organizations to purchase, sell, and safely store virtual currencies and other decentralized assets. With large companies such as Microsoft and BCG involved in the project, this shows how blockchain-based applications and crypto-assets are gaining in popularity and are making their way through various industries. The ICE also plans to initiate a one-day physical bitcoin futures contract when Bakkt launches.

Furthermore, the National Bureau of Economic Research (NBER) recently published a 70-page-long report on the “Risks and Returns of Cryptocurrency”, analyzing three major coins: bitcoin, ripple, and ethereum. The fact that this paper is being published already shows that cryptocurrencies are actively being discussed by institutional investors. The NBER explains a “strong time-series momentum effect and that proxies for investor attention strongly forecast cryptocurrency returns”. The report even goes as far as recommending investing in digital currencies with “1 or 4 or 6 percent in bitcoin”.

Lastly, popular cryptocurrency exchange Coinbase has recently announced the launch of the Coinbase Index Fund. It allows institutional investors, with a minimum investment of $250,000, to place money and bet on the performance of the Coinbase Index. The Coinbase Index is composed of all the coins listed on the American giant’s platform. We clearly see that the desire to invest in cryptocurrencies is not strictly one-sided, but that the crypto space is also eagerly waiting for these institutional investors.

In conclusion, there has been a shift in the way digital currencies, especially bitcoin, are viewed in the institutional space. Previously considered scams, frauds, and even fake, they are now starting to be looked at as real financial assets with considerable potential and upside. In this article, we have seen that numerous events have cemented the belief that opinions are changing, and so has the place of bitcoin in larger investors’ hearts. As a result, we can probably assume that the crypto markets will be positively impacted by the increase of institutional investors in the near future. 

Constantly having to covert Gwei to Ether for transaction/gas fees can be frustrating. The irony is that “gwei’ and all other ether units were created to rid user frustration and promote adoption. The intent was definitely well thought out - you can trust Vitalik & team with logical ideation. But perhaps we require a bit more insight on Ethereum’s units and its intent.  It may just alleviate our frustration for all future transactions.

Let’s just say Ethereum’s core team took a history lesson from bitcoin before they brought forth all the Ether Unit monsters.

In order to grasp the concept of ‘gwei’, lets begin with something we’re all familiar with:

The money in our wallets!
(or if you’re anything like me - the money in the deepest corner of your jeans pocket)

The money in our wallets, regardless of currency, likely also comes in denominations. But for the purpose of this explainer, lets focus on the US Dollar. 1 US Dollar has four denominations: Cents (1 cent), Nickles (5 cents), Dimes (10 cents), and Quarters (25 cents).

Like the US Dollar, Ether too has denominations.
Remember, "Ether" is the currency used within the Ethereum Blockchain. Not ‘Eth’, Not ‘Ethereum’. .... "Ether"

Ether has three primary denominations, namely (lowest to highest): 

• Wei       
• Gwei       
• Finney    

In essence, ‘Gwei’ is simply a denomination of Ether - So when converting Gwei to Ether’ for gas, remember that ‘Gwei’ is Ether - Just a fraction of it. Similar to a regular economy, there are many microtransactions taking place on the Ethereum Blockchain that require payments in fractions.

Just like how a vendor wouldn’t ask you to pay “1/10th of a dollar” for a plastic bag (let’s be realistic - that’s all you’ll get), the ethereum blockchain wouldn’t ask you pay "0.0000021 ether" for transaction fees. It’s just a difficult price to convey.

Instead, you’d be asked to pay 10 cents for the plastic bag, and 2100 gwei for transaction fees. Sounds much better, doesn’t it?

When dealing with currency, fractions are difficult to convey, tedious to convert, and aren’t very user friendly. Hence, the introduction of user friendly denominations, like Gwei.

When considering all three ether units: Wei, Gwei & Finney, you can’t help but wonder - ' why couldn’t Ethereum decide on one denomination? Gwei to ether and vice versa? '
Note: There are actually 10 different ether units, 3 wasn’t too bad a compromise.

It appears that Vitalik was looking to future proof Ethereum so that people could always have an open dialogue about ether in varying quantities regardless of ether price.

the goal of specifying suggestions for all of them was to have some schelling point on what to use for smaller denominations so that people could easily talk about varying quantities of ether regardless of whether the ETH price was $0.01, $10 or $100,000 - Vitalik Buterin

All suggested ethereum units were meant to be a schelling point (an anchor term like cents) depending on various use cases. For now, the three primary ether denominations were meant for the following ether:

• Finney = for micropayments
• Gwei = for gas prices
• Wei = for discussion around APIs and other use cases

If ether’s value skyrockets like that of bitcoin, we’d likely see a rise in ‘finney’ in various ether uses and discussions.

Sharding has morphed from an obscure concept in 2017 into the buzz-word of 2018. The need for blockchain scalability has become glaringly obvious, and several projects have turned to Sharding as a solution.

However, Sharding a blockchain is not a simple task. In fact, it poses challenges that have our best thought-leaders scratching their heads. Several projects have made lofty promises of future scalability using Sharding. But, only few have provided a viable Sharding solution for mass adoption. RadixDLT is one of the rare projects that brings forth a novel approach to Sharding –– an approach that seeks to meet the demands of mass adoption

Right from its conception, the goal for Radix was:  Every single person, on every single device using a single protocol simultaneously.

​Every single person, on every single device using a single protocol simultaneously.

The RadixDLT Sharding architecture was designed (unlike other projects that approached Sharding “after-the-matter”)  to allow for unbounded scalability while maintaining security, and maximizing decentralization.

In this post, I will explain how Sharding works in Radix in a simple way – without any technical jargon.

Break a window, and you have shards of glass. Break an iceberg and you have shards of ice. A shard is simply a broken piece of ‘something’.  So, when you “shard” something, you’re simply breaking it into smaller pieces.

But, why do we shard? Well, you usually shard something because it’s easier to manage. For example, we ‘shard’ a large pizza because it’s easier to eat one slice at a time. It also allows us to share (distribute) the pizza with friends a lot easier.

Similarly, when a database gets too large to handle, we shard it and distribute it across multiple computers. There you go –– you now understand distributed computing & Sharding. It’s really that simple.

Sharding has been used to partition databases for a long time. You simply cut the database (think of an excel sheet) horizontally into several pieces and distribute across multiple “database servers” (machines that ‘serve’ you data when you need it). When the data needs to be retrieved or processed, the relevant database server is called upon to do the task.

In Blockchain these “servers” are what we call “nodes”.  However, Sharding a decentralized system isn’t as straightforward as we’d like. There are complications that a centralized system doesn’t need to concern itself with.

Every distributed system requires a Consensus Method. But, developing a Consensus Method for a Sharded blockchain is tricky. You find yourself sacrificing security in favor of scalability.

Why? Well, a huge component of the security comes from the fact that every node stores all the data. Since every node keeps a copy of the entire database – you can’t cheat/lie about past events. But when you shard that database, each node stores partial data. Suddenly, you can tell Node Bob one thing, and tell Node Lisa another.

To understand this better, think back to when you were a kid.

Remember when your Mom grounded you and your Dad didn’t know about it? If you were anything like me, you tried to sneak out by asking your Dad for permission. Dad didn’t have all the info. And you took advantage of it.

Mom and Dad represent a Sharded database. Sure, together they have all the info needed to run the household. But as individuals, they don’t – and can be lied to about past events (like you being grounded or not)

Founder & CTO  Dan Hughes identified the scalability issues that would plague Bitcoin back in 2012. After several attempts at improving the protocol, he realized that the only solution is a brand new architecture and consensus method. Six years and a lot of sweat later, he brought us Radix DLT – a unique Sharding approach and consensus algorithm.

Radix DLT approaches Sharding in a unique but simple manner.  Most projects take existing Consensus Methods and build a Sharding solution on top of it. But as discussed, this leads to sacrificing security. For example, Sharding on PoS network could result in a One Percent Shard Attack.

Radix, however , started with a Sharded network –– and built a unique consensus method on top of that network. This “Sharding-first” approach allowed them to bypass the limitations faced by other consensus methods.

Essentially, Radix began with the end state in mind, which is:  every single person on every single device using a single protocol.

Radix’s pre-sharded network serves as a fundamental around which they have designed their consensus method (Tempo).

The size of each shard, and the number of total shards are predetermined. Nodes then place themselves atop shards – and can overlap with other nodes in layers. 

This is where it gets interesting…

Remember, every shard has already been created. They all live in the same “Universe” and their location ID is known. Every transaction is stamped with a blend of the sender’s ID and shard ID.

This makes it extremely simple to locate the Shard from which the transaction that has been sent.  Now, if Node Bob tries to double-spend his $10, we don’t need to check every other shard to catch him cheating. We can simply check his shard.

To better understand this let’s go back to our Mom & Dad analogy

​Your Mom grounds you. But this time, she stamps your forehead with the word “Grounded”. You now go to your Dad’s study room and ask him if you can out to play. Your Dad simply looks at your forehead and says “Nope”.

He didn’t need to go check with your Mom. He didn’t need all the info – and was still able to stop you from cheating.

Similarly, the overlapping of nodes and easy cross-shard communication allows each node to store partial info. Which essentially means: not all nodes have to store all the data!  This plays a significant part in Radix’s massive scalability without sacrificing security.

(I simplified this, of course. But we will discuss more on Atoms, Universes timestamping & Temporal Proofs in future posts)

As mentioned earlier, the need to store and process every transaction is a huge limitation for blockchains. Radix is a cleverly designed network that avoids this limitation.

Radix has presented an innovative and noble approach to solving the scaling issues of DLTs. 

Over six years of sweat and frustration, Dan Hughes and team remained true to the goal: Every single person, on every single device using a single protocol simultaneously. The project is still in alpha and the team urges us to participate and help find any potential issues or flaws. 

​Although this was an introductory explanation, I’m sure you can’t help but wonder... Will Radix DLT be the answer to the burning question for mass adoption? Time will tell.

The current process for clearing and settlement is wasteful – and blockchain tech is poised to change that. The results will be a net gain for everyone -- not just for businesses, but for consumers as well.

We tend to take our daily transactions for granted. It’s as simple as swiping your credit card or depositing a cheque, right? Wrong. It only seems that way. In truth, every transaction you make is simply a promise. Once the promise is made, a clearing house steps in to facilitate and  settle the promise .

The clearing house consists of a plethora of middlemen. They ensure that the finality & settlement of the promise made. And in return for their good-deed, they charge you hidden fees. Ding!

Businesses have to endure these unnecessary fees as well – but on a grander scale. They trade securities that have various risks managed by the clearinghouse. This leads to higher fees. Businesses are then forced to pass these costs down to their consumers.  Ding!

We essentially get Double-Dinged!  But wait – it doesn’t end there. Since we’re getting double-dinged, we have less money to buy stuff. And because we have less money to buy stuff, businesses lose profit. Businesses now have to either increase prices or close shop. As you can see, it’s just one never-ending loop of economic waste!

However, eliminating the middlemen like settlement Clearing houses has been all but a fantasy… until the advent of blockchain technology.

Our current models of eCommerce are facing a hasty demise. Enterprises have been swift to leverage blockchain clearing and settlement solutions. The efficiency and cost savings that the technology delivers has been far too enticing to ignore.

Traditional methods of clearing and settlement rely on middlemen to facilitate trust & security. But the friction is so severe that it can take weeks to settle a single transaction.

However, blockchain and distributed ledger technology provide trust & security without  a middle man. This reduces friction and costs for all parties. Furthermore, transaction settlement is conducted within seconds! The resulting cost savings are massive – which are then passed down to consumers.

Across the globe, big name firms and established players have been experimenting with blockchain and distributed ledger technology. The list extends from one end of the world to the other

USA based Broadridge Financial Solutions will be using blockchain trade settlement in the repo market.  Broadridge believes that blockchain technology can

1. Reduce counterparty risk

2. Eliminate wasteful manual intervention

3. Streamline current processes for confirmation

4. Increase audibility, and transparency

London based SETL already utilizes a blockchain platform for settlement of payments. They empower participants to deploy their own blockchain within minutes.

In 2016, India based uTrade was the first Indian company to  employ a blockchain technology for trade settlement. Their “uClear” blockchain platform allows for real time clearing and settlement of securities.  Fast forward to 2018, and we have the Security and Exchange Board of India (SEBI) have begun exploring blockchain technology for trading the stock market.

The Australian Securities Exchanges (ASX) isn’t interested in falling behind either.  ASX will be launching their blockchain based financial services by 2021. The goal is to allow stockbrokers & fund managers to use the blockchain for real-time settlement and tracking.

Established processes and policies have firm roots in modern day operations. Uprooting these policies and redistributing resources will be the biggest challenge firms will face. Change is not easy – and will face strong resistance and certain junctions. Furthermore, the technology itself requires to be battle-tested some more. The complexity combined with the shift in mindset may cause onboarding issues.

Even with the political and regulatory resistance, the adoption of the technology has been moving forward. As understanding increases, decision makers will be coaxed into action by the following advantages:

1. Drastically reduced transaction costs

2. Near instant settlement and clearing

3. Easier Risk management

4. Increased Transparency

Blockchain technology is paving the way for a financial revolution that eliminate a lot of economic waste.

In this post, Krisha explains the 2 Types of Blockchains - Public vs Permissioned Blockchains

We have witnessed the term “blockchain” evolve from something dark and unknown, to the hottest topic on the block. While many are drawn to the ‘Investment’ opportunities that the technology presents, others have latched onto the efficiencies that blockchain promises.

This disparity in interests has prompted questions on the multiple types of blockchains available. Questions like, 'Which type of blockchain would best serve an individual's or company’s interests?"

However, when broken down simply, you’ll realize that there’s only one pivotal difference between each of these blockchain types: 

The need for Permission to participate in each of them.

In essence, every blockchain can be categorized under one of these 2 types:
​Public (Permissionless) Blockchain
​Permissioned Blockchain

A Blockchain's Consensus Mechanism allows participants to come to agreement on a truth that the network was intended to acertain.

The context of “permission” in blockchain lies within this Consensus mechanism.

Depending on the type of blockchain, an individual or entity may or may not require permission to participate in the consensus process.

A Little Perspective - The blockchain consensus mechanism is akin to a jury in a case trial. A jury reaches consensus on the final verdict - they agree on the truth. Consensus is as crucial a function to blockchain, as it is to a case trial.

Randy asked a great question in regard to The Longest Chain Rule & Forks. Over the last few posts, we’ve established that Consensus Methods are not as worried about “verifying” transaction but are more concerned with the “ordering” of transaction. When a fork occurs – we have a dispute in the correct ordering. The Longest Chain Rule kicks in and will fix that dispute for us. Awesome! Hope that is clear. If not, I suggest you read through the posts linked above!

Ah, this is such a great question!  Because it brings us one step closer to understanding the 51% Attack and Double Spends.

Cassidy is concerned about losing her BTC – and understandably so.  She’s always trusted the bitcoin blockchain, but now I’m telling her that her transaction may end up on an “orphaned chain”.  

Orphaned Blocks - The Key is in your Wallet....

A common misconception is that people tend to believe that their BTC or ETH is stored “within” their Wallet.  So, when they send a transaction – there is a belief that they are taking out some BTC (or ETH) and putting it in someone else’s wallet.

This is completely untrue.  But I don’t blame people for thinking that way. The term “wallet” is probably what confuses people. The term “wallet” was probably used to help user adoption, but it’s made explaining the technology even more difficult.

Your Bitcoin or Ethereum Wallet is not like your traditional wallet. It does not hold any of your funds.  

Don’t think of your Wallet as something that holds your BTC or ETH – but more so as something that holds the keys to access your funds.

Your keys allow you to say to the blockchain, “I have the right to spend these funds”

In the previous post I explained the Longest Chain Rule using an analogy. The analogy seemed to help several of the Mango Readers grasp the importance the rule plays. If you haven’t read it yet, I urge you to do so. The Longest Chain Rule plays a vital role in the Bitcoin and Ethereum consensus mechanism. Furthermore, it may also clear out other doubts you may have concerning Blockchain Forks.

This brings me to a question I received from Randy yesterday:

“Hey man,
Great explanation on longest chain!  
Quick question:  
" Why do we have 'Forks' if we have the Longest Chain Rule? 
Is the longest chain rule applied during a 'fork' ? "
​Cheers! - Randy “

Quick Answer:  Yes, the Longest Chain Rule will kick in when forks appear. Each fork will have its own chain and miners can pick which one to apply their work on. But eventually the longer of the chains will be declared the winner – and all miners will apply their work onto that chain.

That’s the quick and dirty answer. But I’d like to dive a bit deeper into this – and run you guys through exactly how this happens.

Why? Because understanding the Longest Chain Rule will be fundamental in allowing you to grasp other ideas (for example: 51% Attack).  In fact, once you grasp this idea – most of the other concepts will become super easy and intuitive.

Longest Chain & Blockchain Forks

But what exactly is a “fork” ? 
A fork is simply an occurence of a disagreement. Remember, the primary aim of a consensus model is “ordering of events”.  

Questions that fall under “ordering of events” criteria:  
Q) “Who gets to place the next block?”
Q)“Whose transaction gets verified first?”

Going back to the Farmer Analogy – the fork was simply the two rows that were placed at the townhall.  Up until the disagreement, everything was fine and dandy. Once the disagreement occurred – two rows were laid. Each row represented a decision. Villagers will vote by placing their sacks of rice in each of the two rows and the longer of the two rows will win.

It’s a similar process in a blockchain. Initially, everything is fine & dandy – and there’s only one “main chain”.  When a disagreement occurs, the chain splits into two. This is called a “fork”.

(It’s kinda like when you’re driving down the main road and it “forks” into two different paths. You have to now choose between two paths. In the blockchain, the mainchain splits into two –  and the miners now choose between two chains.)

But why do disagreements occur? Isn’t proof of work supposed to solve that?  

Why Do Blockchain Forks Occur ?

The Proof Of Work Consensus model is designed to allow the network come to agreement. So forks like this shouldn’t happen, right?

If you read my post on the PoW Cryptographic Puzzle, you know that miners compete against each other to win the right to place the next block.

The “winner” is the miner who solves the puzzles first. The rest of the network then “agrees’ that he gets to place the next block – and they will continue the process with his block being deemed the last approved/valid block.

Let’s say the last valid block is Block A. Miners are now competing fo Block B.  Miners will attempt to solve the puzzle until they hear a winner is declared. “

However, ever so often – we may have two “winners” simultaneously.

Since, the winner is broadcasted and propagated through the network  – different participants may hear a different winner. Once a winner is declared and “heard”, the miners accept that winning block and move on to the next block. 

So now we may have one group of miners accepting Block B, and the rest of the miners accepting Block B2. Hence, fork…

One of the most popular Consensus Methods used today is Proof Of Work. As I write this post, Bitcoin and Ethereum both still use the Proof Of Work consensus method.  Ethereum is set to switch to Proof Of Stake in it’s upcoming Casper update. However, the first iteration of this update will be a hybrid of PoW & PoS. Bitcoin will continue to use Proof Of Work for the foreseeable future. 

Regardless of the consensus method used,
Bitcoin & Ethereum are still blockchains. And such, both networks rely on the Longest Chain Rule when coming to consensus.

In this post, I’ll attempt to dive a little bit deeper into The Longest Chain Rule while still keeping things as simple as possible 🙂

In a previous post I discussed the various Consensus Methods - PoW, PoS, Tangle & Tempo.  Since then I’ve covered a few topics on the most well known of the consensus methods (PoW and PoS).  Today, I want to discuss, what I believe is, the most important of the Consensus Methods for us to grasp: Tempo.

Don’t get me wrong –  I’m not claiming that Tempo is “better” than the rest. “Better” is subjective. However, I do believe Tempo is by far the most groundbreaking of the Consensus Methods. 

Tempo tackles the current issues that plague the DLT/Blockchain world  – namely scalability & mass adoption. And it does so effectively. As such, from an enthusiast perspective, Radix’s Tempo deserves our keen attention.

In this post, I want to start with the most important element of Tempo:
The Logical Clocks.

Don’t worry – it’s not as intimidating as it sounds. In fact, we’re going to keep this as simple as possible 🙂

Far too often people misunderstand the “goal” of a Consensus Method. Most people believe that consensus methods exist to “validate” transactions.  But in truth, the focus of a Consensus Method is coming to an agreement on a set of events. And most importantly to:

In distributed systems, the ordering of events (like transactions) can be difficult. You cannot simply attach a timestamp to an event. Due issues like network latency, each system may witness an event at a different time.  

So how are the systems to agree on the different timestamps? How are they to come to  consensus  on the ordering of events?

Logical Clocks – The Heart Of Tempo

Using normal timestamps for events doesn’t work too well in distributed systems. Why? Put simply – while one system may timestamp an event at 12:01 PM, another may timestamp the same event at 12:02 PM.  This will cause inconsistencies – and a failure to agree on the data.

So instead of using a normal clock, we use a ‘logical’ clock. This allows us to place a timestamp that is relative to an occurence of the previous event. The clock cares more about “what happened before” an event than the exact “time” of the event.  

Confusing? Let’s try an analogy....

It was the devastating effects of the 2008 financial crisis that gave way to the rise of blockchain technology, in particular, the bitcoin blockchain.

The bitcoin blockchain is revolutionary because it enables the world to transact without the need of a middleman. This elimination of the centuries old middleman was partly due to one inherent property of the bitcoin blockchain - Immutability

Lets breakdown the term: Immutable

• Immutable in the dictionary is - “Unchanging over time or unable to be changed”

• Immutable in blockchain is - "The inability of a block to be deleted or modified once it is in the blockchain" - An immutable ledger

​​​​You’re probably wondering: 
" Why is blockchain immutability so important in knocking off the middleman anyways? "

Blockchain Immutability is often misunderstood – even among industry enthusiasts. To truly understand the essence of blockchain immutability, we need to clear out the confusion between Tamper Evident & Tamper Proof.

If you were tasked to come up with a list of things that cannot be changed, and is indeed Tamper Proof, you probably wouldn’t get very far (Go ahead! Give it a shot). Almost everything is susceptible to change, and things that are susceptible to change cannot be Tamper Proof.