Blockchain Innovations in the Energy Sector, Explained

Blockchain Innovations in the Energy Sector, Explained

Innovative blockchain solutions have the potential to improve the energy industry across many levels, including supply chains, financial markets and consumer services #Sponsored

[ihc-hide-content ihc_mb_type=“show“ ihc_mb_who=“reg“ ihc_mb_template=“1″ ]

Before diving into how blockchain can improve the energy sector, it’s important to first understand how this sector operates. In general, upstream generators produce raw material that is processed and transported by the midstream delivery network to downstream distributors, which sell to the end-user. While this seems like a fairly simple process at first, its complexity increases when considering the number of generators, different sources of energy (solar, wind, nuclear, oil, etc.), and the degree to which these processes begin overlapping.

For instance, when electricity is delivered to your home or business, it’s likely sold to you through a retailer (downstream) who contracts with the utility company (midstream) that owns the necessary power lines and purchases power from an (upstream) electricity generator. But where does that electricity come from? The upstream electricity generator itself is a downstream customer for oil, natural gas, solar and more to generate the electricity it produces.

On top of this supply chain system is an ecosystem of commodities traders, leading to highly competitive and efficient markets, but also greatly increasing the financial complexity of the energy sector.

Finally, there are the consumers, who need to use and pay for the energy they use. The bill arriving in the mail at the end of each month is the culmination of this entire process. Unlike most supply chain systems and commodities markets, the end-user of the process is actually directly using the commodity purchased.

Together, these elements make the energy sector a highly suitable candidate for innovation by blockchain technology. It comprises not only a complex supply chain with a need for increased transparency and improved data management, but also a highly transactional marketplace that would benefit from instant settlement. The transparency and immutability of blockchain can empower the end-users of this business- and consumer-facing industry.

Zur Quelle

Innovative blockchain solutions have the potential to improve the energy industry across many levels, including supply chains, financial markets and consumer services #Sponsored

Classics Against Innovations: Can Venture Success Rate Be Outraced by Crypto?

Classics Against Innovations: Can Venture Success Rate Be Outraced by Crypto?

ICO, STO, IEO, IDO, … , and other difficulties of contemporary investment models, but is VC still relevant and works as it did?

[ihc-hide-content ihc_mb_type=“show“ ihc_mb_who=“reg“ ihc_mb_template=“1″ ]

In a world where blockchain technology is rapidly breaking barriers and disrupting industries one at a time, the emergence of new models to replace classical crowdfunding ventures is just a matter of time. More than a decade after Bitcoin’s introduction, we’ve witnessed new crowdfunding models replacing the initial public offering for funding blockchain-fueled projects — the initial coin offering, decentralized autonomous organization DAO, the security token offering and the initial exchange offering.

History indicates that if you have honey, the bees will follow. However, countless illicit schemes and scam projects have caused some misguided investments. So, why have there been so many attempts to establish an ideal crowdfunding approach for the maturing technology industry, yet still, none of the introduced models can change the standard venture success rate when it comes to investments?

The blockchain impact on crowdfunding

The traditional model of third-party investment to fund private business development is considered an outdated, time consuming and complicated process. The similarity between IPOs and ICOs is that these financial models are special cases of crowdfunding. 

Stock IPO is the most respectable form of crowdfunding so far, with the prospect of a financial return for its sponsors. However, the downside of this model is its high entry threshold for both the sponsors and, primarily, the organizing company. Sponsors must access the exchange through a broker, while the company undergoes a complicated listing procedure. 

The advent of blockchain technologies, new projects and markets, and as a result — the emergence of initial coin offerings worldwide — has become a significant turning point in how developers can find a way to fund their perspective idea or project, significantly lowering the entry threshold.

The creation of an ICO itself is an attempt to apply exchange IPO rules in a more democratic and free environment of the cryptocurrency market. During an ICO procedure, the company does not place shares, but tokens instead, which are regarded the same as cryptocurrencies. Tokens are the new shares, but tied to a specific project and usually do not represent anything new technically.

From king of the hill to oblivion 

The higher democracy of the ICO procedure means it usually involves more independent and smaller players than the more traditional IPO. When it comes to investors, no one can compare with Vanguard Group, and among the issuers — for example, with Amazon. ICOs were used not by top companies with a well-known and established reputation, but by high-tech startups and teams with a promising idea and no danger of suffering reputational damage.

Compared to 2016, the blockchain crowdfunding market was overheated with capital already, which has inevitably led to less potential benefit for possible ICO investors and almost collapsed the model a year later. ICOs were the red-hot trend, as 853 projects collected over $6.2 billion. This increased the following year, with 1253 ICOs raising $7.8 billion. However, this success was scuppered by dodgy projects and an increasing number of Ponzi schemes, making investors question whether ICOs were a genuine investment at all. Right there, the initial exchange offering stepped in. In total, token generation events during 2019 raised $3.2 billion, while ICOs raised ten times less during the same period.

Companies like Coinbase and Circle raised money from venture capitalists. By the middle of 2019, VC funding in cryptocurrency startups accounted for $822 million. Moreover, a Gartner study suggests that blockchain is estimated to generate $3.1 trillion in new business value by 2030.

Related: Venture Capital Financing in Crypto, Explained 

One of the well-known cases of a successful ICO is the creation of the Ethereum (ETH) cryptocurrency. In 2014, the company issued tokens, which rose radically in price some time later. In 2014, only $16 million was collected in total for various ICO projects, and by 2016, this figure increased to $90 million, while 2017 broke all records for market capitalization. Moreover, during the period from 2015 to 2017, funding increased from $6 million in 2015 to more than $6 billion. The overall venture capital market amounted to over $76 billion in the United States that year.

Related: What is Ethereum. Guide for Beginners.

So, can decent projects be distinguished from scams? Of course it is not easy, particularly since the number of fraudulent projects increased to a whopping 80% in 2017.

The attractiveness of the ICO mechanism resulted in the global downside trend the year after the hype started and catastrophe for blockchain crowdfunding, slowing down global acceptance drastically. While it was suitable for raising funds and launching projects, a settlement mechanism for distributing dividends was absent.

The strategy of reimbursement to ICO shareholders had two significant drawbacks: a change of shares ownership upon repurchasing the tokens, which does not exist in the classical system, where shares are separated from the dividends; and the liquidity of any ICO tokens is lower than the liquidity of fiat money from the very beginning, because the coins are derived from a particular project of the company, and the real money is a derivative of the economy — that is, all companies combined.

In the latter case, the company has to pay a margin for the difference between the purchase and the sale of the ICO coin to conduct the repurchases. Due to the low liquidity of the ICO coin tied to a specific project, the margin cost will be high. Also, the liquidity of the ICO coin is lower than the liquidity of the universal coin tied to the economy or particular assets as a whole.

Deceitful new ways 

The cryptocurrency environment has fundamental differences from the traditional economy, and it is hardly necessary for the state to deal with its regulations. Specific methods and solutions to bring the reliability of crypto investments closer to the standards of the classic stock market are required but with maximum democratic rules. They must and will be developed over time.

The advent of IEOs in late 2018 to early 2019 has introduced another approach to regulation over the chaotic and already infamous market, shifting the power of a token sale from the hands of unknown amateurs and third parties to exchanges.

Related: A New Trend in Crypto Funding Campaigns: Companies Resorting to IEOs

In fact, IEO fraud has become additional proof that many well-established crypto exchanges fake their trading volumes on a constant basis. Even the IEO model was intended to be a more trustworthy alternative to the more traditional ICO — an activity that became infamous due to global regulatory heat, exit scams and countless illicit actors. The concept of an exchange serving as the white knight that screens out the unworthy market participants and questionable projects had merit, though eventually compromised itself in less than a year. As IEO integrity can’t be trusted anymore, some cryptocurrency startup projects are already lamenting and showing the public how exchanges have defrauded them.

Bitwise presented a white paper to the U.S. Security and Exchange Commission, which showed the results of studies performed on cryptocurrency exchanges. It was reported that only ten exchanges show their real volume, while other cryptocurrency exchanges fake their volume. This results in the truth that 95% of all Bitcoin trading volumes are faked. The most important reason was to gain visibility on data-aggregating platforms like Coinmarketcap and also to inflate their listing fees.

Venture success rate can’t be beaten

Then again, why is the VC still at large in 2020? Venture funds have such things as venture capital power. They can capitalize on “liquidation preference,” which means gaining power on everything that an investment comes with. For example, when closing a particular project, a corporation can get its hands on everything that comes from the investment: equipment, merchandise and so on.

Initial coin offerings don’t have a mechanism for legal regulations. So, 5% of paybacks were an optimistic number in this case when it comes to returns.

Crypto projects will never be able to fight the gravity of venture success rates, especially without legal bounds. Without it and due diligence, 2% is a good number. So, we can tell that 40 out of 2000 established successful projects is not a very significant achievement, but rather a reality that comes along with mathematic calculations.

95% of VCs aren’t actually returning enough money to justify the risk, fees and illiquidity that their investors are taking on by investing in their funds.

To summarize, venture capital is a tough business. Investors struggle to get paid in excess returns for the risk, fees and illiquidity they take on for investing in venture capital. Entrepreneurs struggle to scale and grow their companies and position for great exits. It’s not natural for a founder at stage one to know how he’ll grow from zero to billion. So many things will change along the journey. VCs struggle to generate the returns they promise, and only a very few manage to deliver.

But VCs enjoy the only downside protection in the business — they can rely on fees to pay themselves when their investments are mediocre. The long feedback cycle means that VCs can raise a few funds — and lock in a few fee streams — before their less-than-stellar returns catch up with them.

Future perspectives

ICOs, STOs, IEOs and the later initial DEX offering, or IDO… We have seen and learned a lot of new abbreviations during the last few years and there is no doubt that the show, and the model list, must and will go on.

Security token offerings seem to be a new cure for the modern crypto investment market and its harsh conditions. In fact, they are now considered the next and logical evolutionary step. First of all, such models intend to issue digital assets in full compliance with securities legislation to provide a higher degree of protection for investor rights and lower regulatory risks for token issuers. In addition, STOs are guided by a different target audience — only professional (accredited) investors can participate in such a placement.

Security tokens have many pros when compared to traditional financial products. Despite lacking intermediaries such as banks and other organizations, they provide a completely different environment for investing and concluding deals — more solvent and more responsible.

Polymath, a security token protocol platform, estimates that security tokens will soon win the race with the now-dominant “utility tokens” like Bitcoin, and sees security tokens exploding to a value of $10 trillion by 2020.

Despite the rising trend for the STO model, some market players will still continue to adhere to the principles of traditional ICOs and try to fund their creative project through the infamous model. In its essence, STO is closer to a classical IPO than an initial coin offering. With their strict rules, STOs are a product of a new time, invented to avoid an “illegal” approach to fundraising. Moreover, these rules create a real investment opportunity for institutional investors, which can lead to a plentiful flow of funds into the blockchain field.

Speaking of the later model’s emergence, the forthcoming revelations may be different as market participants may envision and implement various models in the future, aimed to go toe-to-toe with strict regulations implied by the global and local watchdogs. We need a very precise and reliable system, in which tokens will ultimately fall into the capital structure. What this model may be, we’re about to see in the year to come.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Gregory Klumov is a sought-after stablecoin expert whose insights and opinions appear regularly in numerous international publications. He is the founder and CEO of STASIS, a technology provider that issues the most widely-used Euro-backed stablecoins with the highest transparency standard in the digital asset industry.

Zur Quelle

ICO, STO, IEO, IDO, … , and other difficulties of contemporary investment models, but is VC still relevant and works as it did?

The Evolution of Bitcoin’s Technology Stack

The Evolution of Bitcoin’s Technology Stack

For more than 10 years already, Bitcoin’s innovations have been pushed on all fronts: What are those improvements?

[ihc-hide-content ihc_mb_type=“show“ ihc_mb_who=“reg“ ihc_mb_template=“1″ ]

Over the last 10 years, the Bitcoin ecosystem has attracted developers to dedicate thousands of hours to improve and revamp most of its underlying codebase. Yet, Bitcoin (BTC) is largely the same. The reason for this is that its core set of consensus rules that define its monetary properties, such as its algorithmic inflation and hard-coded supply, remain unchanged.

Time and time again, factions have attempted to change these core properties, but all hostile takeovers thus far have failed. It’s often a painful process but one that highlights and solidifies two of Bitcoin’s biggest virtues: No single party can dictate how Bitcoin evolves; and the absence of centralized control protects Bitcoin’s monetary properties.

The barriers to development — and working through them

The values that make Bitcoin a popular phenomenon are also those that make developing software atop Bitcoin more challenging than any other digital asset. Developers are limited to what they’re able to transform in order to not undermine its apparatus as a store of value.

Nonetheless, as we’ll see from the examples below, innovation in Bitcoin is possible. It requires creativity and patience.

Since changing Bitcoin’s core layer requires a quasi-political process that may infringe upon its monetary properties, innovation is often implemented as modules. This development is similar to that of the internet’s protocol suite, where layers of different protocols specialize in specific functions. Emails were handled by SMTP, files by FTP, web pages by HTTP, user addressing by IP and packet routing by TCP. Each of these protocols has evolved over time to create the experience we have today.

Spencer Bogart of Blockchain Capital has captured this development succinctly: We are now witnessing the beginning of Bitcoin’s own protocol suite. The inflexibility of Bitcoin’s core layer has birthed several additional protocols that specialize in various applications, like Lightning’s BOLT standard for payment channels. Innovation is both vibrant and relatively safe, as this layered approach minimizes potential risks.

The diagram below is an attempt to map all relatively new initiatives and showcases a more complete representation of Bitcoin’s technology stack. It is not exhaustive and does not signal any endorsement for specific initiatives. It is, nevertheless, impressive to see that innovation being pushed on all fronts — from Layer 2 technologies to emerging smart contract solutions.

Layer 2

There has been a lot of talk lately about the rate of adoption of the Lightning Network, Bitcoin’s most prominent Layer 2 technology. Critics often point to an apparent decline in the number of channels and total BTC locked when evaluating Lightning’s user adoption. Yet, these metrics aren’t the most definitive measurement of adoption.

Related: What Is Lightning Network And How It Works

One of the most underrated virtues of the Lightning Network is its straightforward privacy properties. Since Lightning does not rely on global state reconciliation — i.e., its own blockchain — users can transact privately over using additional techniques and network overlays, like Tor. Activity happening within private channels is not captured by popular Lightning explorers. As such, an increase in private usage of Lightning has resulted in a decrease in what can be publicly measured, leading observers to erroneously conclude that adoption is down. While it is true that Lightning must overcome substantial usability barriers before it can enjoy wide adoption, using misleading metrics to make assertions about the current state of the network serves few.

Another recent development in the field of Layer 2 privacy was the creation of WhatSat, a private messaging system atop Lightning. This project is a modification of the Lightning Network Daemon (LND) that allows the relayers of private messages, who connect the entities communicating, to be compensated for their services via micropayments. This decentralized, censorship-and-spam-resistant chat was enabled by innovations in the LND itself, such as recent improvements in the lightning-onion, Lightning’s own onion routing protocol.

There are several other projects leveraging Lightning’s private micropayment capabilities for numerous applications from a Lightning-powered cloud computing VPS to an image hosting service that shares ad revenue via microtransactions. More generally, we define Layer 2 as a suite of applications that can use Bitcoin’s base layer as a court where exogenous events are reconciled and disputes are settled. As such, the theme of data anchoring on Bitcoin’s blockchain goes beyond Lightning, with companies like Microsoft pioneering a decentralized ID system atop Bitcoin.

Smart contracts

There are projects attempting to bring back expressive smart contract functionality to Bitcoin in a safe and responsible way. This is a significant development because, starting in 2010, several of the original Bitcoin opcodes — the operations that determine what Bitcoin is able to compute — were removed from the protocol. This came after a series of bugs were revealed, which led Satoshi to disable some of the functionality of Script, Bitcoin’s programming language.

Over the years, it became clear that there are non-trivial security risks that accompany highly-expressive smart contracts. The common rule of thumb is that the more functionality is introduced to a virtual machine — the collective verification mechanism that processes opcodes — the more unpredictable its programs will be. More recently, however, we have seen new approaches to smart contract architecture that can minimize unpredictability and also provide vast functionality.

The devise of a new approach to Bitcoin smart contracts called Merklized Abstract Syntax Trees (MAST) has since triggered a new wave of supporting technologies for Bitcoin smart contracts. Taproot is one of the most prominent implementations of the MAST structure that enables an entire application to be expressed as a Merkle Tree, whereby each branch of the tree represents a different execution outcome.

Another interesting innovation that has recently resurfaced is a new architecture for the implementation of covenants, or spend conditions, on Bitcoin transactions. Originally proposed as a thought experiment by Greg Maxwell back in 2013, covenants are an approach to limit the way balances can be spent, even as their custody changes. Although the idea has existed for nearly six years, covenants were impractical to be implemented before the advent of Taproot. Currently, a new opcode called OP_CHECKTEMPLATEVERIFY — formerly known as OP_SECURETHEBAG — is leveraging this new technology to potentially enable covenants to be safely implemented in Bitcoin.

At first glance, covenants are incredibly useful in the context of lending — and perhaps Bitcoin-based derivatives — as they enable the creation of policies, like clawbacks, to be implemented on specific BTC balances. But their potential impact on the usability of Bitcoin goes vastly beyond lending. Covenants can allow for the implementation of things like Bitcoin Vaults, which, in the context of custody, provide the equivalent of a second private key that allows someone that has been hacked to “freeze” stolen funds.

In essence, Schnorr signatures are the technological primitive that make all of these new approaches to smart contracts possible. And there are even edgier techniques being currently theorized, such as Scriptless Scripts, which could enable fully private and scalable Bitcoin smart contracts to be represented as digital signatures as opposed to opcodes. These new approaches may enable novel smart contract applications to be built atop Bitcoin.


There have also been some interesting developments in mining protocols, especially those used by mining pool constituents. Even though the issue of centralization in Bitcoin mining is often wildly exaggerated, it is true that there are power structures retained by mining pool operators that can be further decentralized. 

Namely, pool operators can decide what transactions will be mined by all pool constituents, which grants them considerable power. Over time, some operators have abused this power by censoring transactions, mining empty blocks and reallocating hashing without the authorization of constituents.

Changes to mining protocols have aimed to subvert the control that mining pool operators can have on deciding what transactions are mined. One of the most substantial changes coming to Bitcoin mining is the second version of Stratum, the most popular protocol used in mining pools. Stratum V2 is a complete overhaul that implements BetterHash, a secondary protocol that enables mining pool constituents to decide the composition of the block they will mine — not the other way around.

Another development that should contribute to more stability is reignited interest in hash rates and difficulty derivatives. These can be particularly useful for mining operations that wish to hedge against hash rate fluctuations and difficulty readjustments.


Contrary to some arguments out there, there are a host of emerging protocols that can bring optional privacy into Bitcoin. That being said, it is likely that privacy in Bitcoin will continue to be more of an art than a science for years to come.

More generally, the biggest impediment to private transactions across digital assets is that most solutions are half-baked. Privacy assets that focus on transaction-graph privacy often neglect network-level privacy, and vice versa. Both vectors suffer from a lack of maturity and usage, which makes transactions easier to de-shield via statistical traceability analysis at either the peer-to-peer (P2P) network layer or the blockchain layer.

Thankfully, there are several projects that are pushing boundaries on both fronts.

When it comes to transaction-graph privacy, solutions like P2EP and CheckTemplateVerify are interesting because privacy becomes a by-product of efficiency. As novel approaches to CoinJoin, these solutions can increase the adoption of private transactions by users that are solely motivated by lower transaction fees. As CoinJoins, their privacy guarantees are still suboptimal, but unshielded sent amounts can be beneficial, as they preserve the auditability of Bitcoin’s supply.

If lower transaction fees become a motivator and lead to an increase in Bitcoin’s anonymity set — the percentage of UTXOs that are CoinJoin outputs — de-anonymization via statistical analysis will be even more subjective than it already is.

There has also been considerable progress in the privacy of P2P communications, with protocols like Dandelion being tested across crypto networks. Another notable development is Erlay, an alternative transaction relay protocol that increases the efficiency of private communications and reduces the overhead of running a node. Erlay is an important improvement since its efficiency gains enable more users to more easily complete IBD and continuously validate the chain, especially in countries where ISPs impose caps on bandwidth.

It’s just the beginning

These examples are only a handful of initiatives in play to transform the Bitcoin framework. Bitcoin, in its totality, is a constantly evolving suite of protocols.

While evolution within a relatively strict set of rules and values can be challenging for developers, the layered approach that we’ve seen unfold is what makes gradual, effective change possible. Minimizing politicism within Bitcoin and protecting its fundamental monetary properties are necessary parts of the process. Developers are learning how to work within these bounds in a meaningful fashion.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Lucas Nuzzi, director of technology of Digital Asset Research. He heads up DAR’s research arm, developing original reports and insights on all areas of the cryptocurrency ecosystem. Widely regarded throughout the digital asset community as an expert on blockchain and distributed systems, Lucas has contributed to several major publications. Prior to co-founding DAR in 2017, he was a blockchain researcher and consultant for a handful of years.

Zur Quelle

For more than 10 years already, Bitcoin’s innovations have been pushed on all fronts: What are those improvements?

Social Innovations and Secret Conversations (on the Blockchain)

Social Innovations and Secret Conversations (on the Blockchain)

There’s a novelty in finding new ways to communicate through coded conversations and secret languages. How is this being implemented for good — or otherwise — on blockchains?

[ihc-hide-content ihc_mb_type=“show“ ihc_mb_who=“reg“ ihc_mb_template=“1″ ]

There’s a novelty in finding new ways to communicate through coded conversations and secret languages. How is this being implemented for good — or otherwise — on blockchains?

Since its beginnings, blockchain technology has led to many movements, including the formation of a unique crypto community. This blockchain community is forming its own lexicon (including a more formal vocabulary that industry opinion-makers are creating and debating and Twitter-based crypto slang like hashtagging Lambos and Bitcoin whales.) 

There is also another language that has developed, the one in blockchain platforms themselves — developed through a “glitch” in the blockchain system — through a coded instruction that was meant for something else entirely. This is a conversation created through transaction signatures — the method of transfer — with coded messages built into the hash. 

What started this trend? In part, it came from necessity, the need to find an anonymous way to converse with each other — to complete a private transaction. It may also be rooted in psychology. “Groups of people form their own private lexicons because coded language is exclusive, exciting and defiant,” Gary Nunn wrote. An exclusive argot gives ownership, pride and a sense of being part of something greater than oneself.

Private interactions on blockchains

A coded language can be used for harmless activities such as in-jokes or conversations, but they are often developed by a person or people in need of a way to communicate as anonymously as possible. And so, it stands to reason that transaction signature conversations have been used for harmless fun between online friends and also for illicit activities between bad actors.

What are some of the ways that transaction signatures have been used for conversing, for better or for worse? Let’s start first with a description of how a conversation actually works using blockchain technology.

Signed on the dotted line, with a public and private key

A digital signature or transaction (TX) signature is the detail of an electronic document that is used to identify the person transmitting data on a blockchain. The signature acts as a transaction validation, linked to the public key of the entity involved. It’s a confirmation that the transaction has not been tampered with in any way — a trustless transaction. Here’s how it works:

How digital signatures work: signing the message with private key

How digital signatures work: verifying the message with public key

Coded conversations through a “glitch” in the tech

Users of the technology at some point or another realized that it’s possible to add a so-called “OP_Return output” to the transaction — an instruction coded into the Bitcoin blockchain by Bitcoin developers. This output would be nonspendable, the data attached to it, however, would remain on the blockchain forever. And so, coded conversations on the blockchain began.

Some believe that this is an irresponsible use of the technology, as the Bitcoin blockchain was created solely for financial transactions and not a record for arbitrary data. Either way, it has become a function used by transactors, whether it was initially intended as such or not.

Here are some of the more novel ways that the OP_Return output has been used so far:


One of the first OP_Return messages that gained notoriety was the use of the lyrics “Never Gonna Give You Up” by Rick Astley (following the theme of the well-known rick-roll meme) to play pranks on users. A hacker, for example, who demanded payment by blackmail was rick-rolled by a prankster who used the first few symbols of addresses to spell out the lyrics of the song and send only tiny amounts of Bitcoin. Each transaction made by the prankster was worth 0.001337 BTC, and was effectuated in homage to leet, a code of modified spelling using numbers in place of letters.

Rickrolling on the blockchain

Ethereum DApps

A relatively slow uptake in decentralized application (DApp) adoption might be due to users having to pay a transaction fee to complete an action — Mahesh Murthy of Zastrin noted the fee as a pain point in a blog post he wrote about a voting DApp he created. He mentions an idea by John Backus as a solution to this bottleneck using a similar function to OP_Return for Ethereum DApps through a private key.

Ethereum DApps

Eternity Wall

Eternity Wall, a service for writing short messages on blockchain, is mostly used for writing proverbs, jokes and love declarations, but it can also be used to reply to a message sent via the service, so conversations may be created. 

Eternity Wall

Ricardo Casatta, creator of Eternity Wall, has also promoted the potential political use case for such a tool as an uncensorable means of communication, having written in a post, now unavailable:

„If you live under a dictatorship, you could use it for saying something that your government would remove or block.“ 

Eternity Wall

Blockchain riddles

An entertaining way of using OP_Return is to organize quizzes on a blockchain. The address 1HoTZGKwXY2HM8UBpiBKtBUd8otPpsJ5Pc has sent several riddles via OP_Return messages, for example.

Here’s what was sent by the address:

  1. Five riddles, one-word answers. Start at 1HKGame213Part2xxxxxxxxxxxxzQajrj
  2. What English word has three consecutive double letters?
  3. What disappears as soon as you say its name?
  4. Which word in the dictionary is always spelled incorrectly?
  5. You can hold it without using your hands or arms. What is it?
  6. What word becomes shorter when you add two letters to it?

And probably the answers lead you to some private key, since the last message was:

„PrivateKey=SHA256(tolower({2} {3} {4} {5} {6})). Transfer to prove solution.“

Blockchain riddles

The webpage Bitscribble was created as a simple interface that could be used to write messages on a blockchain via the OP_Return script. 

In January 2019, Parisian-based street artist Pascal Boyart created a mural with a hidden Bitcoin prize, announcing the treasure hunt on Twitter to participants eager to win the coveted reward. The stunt was a celebration of the 10th anniversary of the first mining of a Bitcoin block. If you’re wondering if it’s been solved yet, you can find out here.

Image with a hidden message

There has been everything from marriage proposals to cryptic clues to messages supposedly written by Satoshi encrypted on the Bitcoin blockchain.

If you’d like to learn how to write a blockchain message yourself, here’s a step-by-step guide.

Blockchain messaging used in elevated situations

The OP_Return script may be used to contact a person on the Bitcoin blockchain if you only know their Bitcoin address. There are some incidents in which this tool has proven very useful for transactors: For example, a person may be contacted if they received stolen funds for some reason or if someone accidentally sent them a transaction that needs to be returned.

When communicating with a hacker following a security incident in August 2016, Bitfinex offered the OP_Return instruction as a potential method for anonymous communication, should the hacker wish to get in touch with the exchange and find a compromise in return for a bug bounty.

Going back as far as 2014, the OP_Return script has often been used by spammers

Bitcoin Cash as a messaging service

Messaging on the Bitcoin Cash blockchain is not something done in secret anymore, either. Memopay, for example, is a service that offers its customers advertising opportunities on the Bitcoin Cash (BCH) blockchain. Bitcoin Cash has proven to be more popular for messaging services, likely due to lower blockchain transaction fees.

There is, in fact, a social network called Memo in which all networking actions are recorded to the BCH blockchain. Bitmain co-founder Jihan Wu has publicly tweeted that he has an account on Memo, inviting his Twitter followers to sign up for an account and get in touch with him.

CryptoGraffiti is a solution that allows anyone to easily decode and read arbitrary messages that have been saved to the blockchain. The tool detects transactions that contain either “human-readable text messages or files of known formats” and publishes it under a reader tab.

Social networking on a public, immutable ledger

With the advent of social media as a powerful communication and advertising tool, the conversation has inevitably — and regularly — returned to how a decentralized technology like blockchain can be harnessed to provide enhanced social networking opportunities. Realistically, though, until the user interface and user experience are at the level of major current social networks, the tech won’t appeal to those who already have easy-to-use messaging applications at hand.

Not only that, but the question of whether people want their private (or indeed public) conversations permanently imprinted on a ledger remains to be seen. Transparency is important, but people still want to feel a certain sense of privacy. 

That being said, the world is no longer a private forum, with public data becoming so available as users sign their rights away. Perhaps it’s not such a stretch to envision a decentralized, international social networking platform on a public and permanent ledger.

The article was co-written by Kyrylo Chykhradze and Pavel Mischchenko. 

Kyrylo Chykhradze is the Head of Product at Crystal Blockchain, Bitfury’s analytics tool for blockchain and cryptocurrencies. He joined Bitfury after having worked as an academic researcher for five years, where his areas of focus were graph theory and real-world network analysis. Along with being deeply involved in forming the global product strategy for Crystal Blockchain, Kyrylo is also leading its internal forensic investigation department.

Pavel Mishchenko  is the Head of R&D at Crystal Blockchain. He joined Bitfury in 2015 after obtaining a master’s degree in Advanced Mathematics at the Ecole Normale Supérieure de Lyon. His primary areas of interest are statistics, data analysis, and probability theory. Pavel actively participates in mathematics competitions and has been awarded gold medals at the International Mathematical Olympiad. Pavel is the Research & Development Lead at Crystal, and is also heavily involved in the development of algorithms for efficient cryptocurrencies data analysis.

The views and opinions expressed here are solely those of the authors and do not necessarily reflect the views of Cointelegraph.

Zur Quelle

There’s a novelty in finding new ways to communicate through coded conversations and secret languages. How is this being implemented for good — or otherwise — on blockchains?