DTG’s Craig Drabik and Canopyright Founder Jeffrey Hamilton with Hedera’s Gehrig Kunz on DLT and Blockchain in the Real-world

Cannabis entrepreneur Jeffrey Hamilton and TxMQ DTG Practice Manager Craig Drabik join host Gehrig Kunz on Blockchain in the Real-world to discuss cannabis IP rights and the role of the Hedera network in the development of Canopyright.

Canopyright employs distributed ledger technology on the Hedera network to provide a “decentralized herbarium where marijuana breeders can register their unique cultivars and transact business with growers effortlessly, securely, confidentially, and paperlessly.”

TxMQ’s Disruptive Technologies Group specializes in applying cutting edge technologies such as blockchain, IoT, and machine learning to solve critical business problems and open up new business models.

Ready to learn how DTG can help you use emerging technologies to disrupt your industry?  Contact us to schedule a free discovery session today!


Hedera Hashgraph – A Quick and Very Simple Explanation

What is Hedera Hashgraph?

Hedera Hashgraph is a Distributed Ledger Technology (DLT) and consensus algorithm. Even though Hashgraph is actually a DAG (Directed Acyclic Graph) it has been referred to as“Blockchain on Steroids” and “Blockchain 2.0” because it addresses many of the issues most DLT’s are currently facing with broader adoption.

Why do we need another DLT?

Hedera Hashgraph is a fast, fair and secure infrastructure to run Decentralized Applications or DApps. This technology is ridiculously fast, has a high throughput (potential for over one million transactions per second), and is asynchronous Byzantine Fault Tolerant (a-What?), and the only DLT that has a mathematically proven consensus mechanism.

Quick Answer: It works, it’s secure, and fixes the issues that have been holding back Blockchain from becoming a viable enterprise-grade technology since it’s inception.

Want to learn more about Hashgraph and other DLT’s reach out below and let us know. We’d love to talk about how to utilize Distributed Ledger Technologies to disrupt your industry by turning your use-case into a fully functioning Decentralized Application.


The Case for the Crypto Crash

The Case for the Crypto Crash

Anyone who knows me knows that I am a big supporter of, and believer in distributed ledger technology, or DLT.
It has the potential to revolutionize the way we build certain types of solutions, and the way certain systems, software, and institutions, even people, interact.
That being said, I also believe a strong argument can be made that crypto currencies, at least in their current incarnation, are destined to fail.
Full disclosure: I own no crypto currencies.
There is a foundational flaw in the use case of cryptocurrency. It is NOT easily transacted; often having lengthy or ungainly settlement times, requiring in almost all cases, conversion to fiat currency, and it’s generally ill suited to the very task it was designed to perform: storing value for transacting business.

It’s hard for people to use crypto currencies.

I have heard first hand, countless stories of transactions intended to be conducted using crypto currencies, where the parties wouldn’t agree to them without one or the other agreeing to guarantee value to some fiat currency.
If this continues and people aren’t able to use cryptocurrency as a currency, what then? Normal market rules would dictate a crash to zero.
But is this a market that follows normal market rules? What exactly is normal?

Fiat Currency, or Fiat Money:

Let’s back up and look at fiat currency. Take the US dollar.
Early on, the United States dollar was tied to the gold standard. The United States Bullion Depository, more commonly known as Fort Knox, was established as a store in the US for gold that backed the dollar.
In 1933, the US effectively abandoned this standard, and in 1971, all ties to gold were severed.
So what happened? Effectively nothing. Yet the US backs the dollar.
Why? The US dollar is intimately tied to our financial system by the Federal Reserve, which, as demonstrated for better or worse in the financial crisis of 10 years ago, will do everything in its power to shore up the currency when needed.
So we operate today with the shared belief, some might call it a shared delusion, that there is value in the money we carry in our wallets and in the bank statements we see online.

Is cryptocurrency approaching this level of shared belief?

Who will step in if crypto crashes? In short, no one. There is no governing body, by design, behind any cryptocurrency.
As I write this, all crypto currencies are down over 10%, some are down over 20%. Nothing will prop it back up other than buyers: speculators hoping to buy on the downswing, hoping to hold until it rises again.
So, is this a normal market? I say no, it is not. I see no ultimate destination on this journey, other than disappointment.
If you have risk capital to play with, go ahead, risk some on crypto if you wish.
Personally, I would rather invest my money in companies I can understand, with business models that make sense. That being said, in my case, this also means investing in my company’s work to build solutions on the technology underlying crypto currency, or distributed ledger technology.

You may be asking yourself, how can he support distributed ledger technology and not have faith in cryptocurrency?

The answer here is simple. The technology is solid, the use case of crypto is flawed. Java is solid, but not all java applications are good applications. Crytpo currency is just another application running on distributed ledger, and as I have posited herein, a bad one.

Chuck Fried is the President and CEO of TxMQ, a systems integrator and software development company focused on building technical solutions for their customers across the US and Canada.
Follow him at www.chuckfried.com, or @chuckfried on Twitter, or here on the TxMQ blog.

Economic Theory and Cryptocurrency

This post was originally published on ChuckFried.com, with permission to repost on TxMQ.com.

Economic Theory and Cryptocurrency

In a rational market, there are basic principles, which apply to the pricing and availability of goods and services. At the same time, these forces affect the value of currency. Currency is any commodity or item whose principle use is as a store of value.
Once upon a time, precious metals and gems were the principle value store used. Precious jewels, gold, and silver were used as currency to acquire goods and services. Over time, as nations industrialized, trading required proxy value stores, and paper money was introduced, which was tied to what became the gold standard. This system lasted into the 20th century.
As nations moved off the gold standard, Keynesian economics became a much-touted model. Introduced by John Maynard Keynes, a British economic theorist in his seminal, depression era work “The General Theory of Employment, Interest and Money”, it introduced a demand side model whereby nations were shown to have the ability to influence macro economics by modifying taxes and government spending.
Recently, crypto currency has thrown a curveball into our economic models, with the introduction of virtual currencies. Bitcoin is the most widely known, but there are multiple other virtual currencies or crypto currencies as they are now called because of the underlying mathematical formulas and crypto graphic algorithms which govern the network these are built on.

Whether these are currencies or not is itself an interesting rabbit hole to climb down, and a bit of a semantic trap.

They are not stores of value, nor proxies for precious goods, but if party a perceives a value in a bitcoin, and will take it in trade for something, does that not make it a currency?
Webster’s defines currency as circulation as a medium of exchange, and general use, acceptance or prevalence. Bitcoin seems to fit this definition.
Thus the next question…

What is going on with the price of bitcoin?

Through most of 2015, the price of one bitcoin started a slow climb from the high 200s to the mid 400s in US dollars; that in itself is a near meteoric climb. The run ended at around $423, for reasons outside the scope of this paper, actual pricing is dependent on the exchange one references for this data.
2016 saw an acceleration of this climb, with a final tally just shy of $900.
It was in 2017 where the wheels really came off, with a feverish, near euphoric climb in the past weeks to almost $20,000, before settling recently to a trading range of $15-$16,000 per bitcoin.
So what is going on here? What economic theory describes this phenomenon?
Sadly, we don’t have a good answer, but there are some data points we should review.
First, let’s recognize that for many readers, awareness of bitcoin happened only recently. It bears pointing out that one won’t buy a thing if one is unaware of that thing. Thus, the awareness of bitcoin has played a somewhat significant role in driving up it’s value.
To what extent this affected the price is a mystery, but if we accept this as given, clearly as more and more people learn about bitcoin, more and more people will buy bitcoin.

So what is bitcoin?

I won’t go deep here since it’s likely if you are reading this, you have this foundational knowledge, but bitcoin was created by a person, persons, or group using the pseudonym Satoshi Nakomoto in 2009. It was created to eliminate the need for banks, or third parties in transactions; it also allows for complete anonymity of the holder of the coin.
There is a finite upper limit of the maximum number of bitcoins that can ever be created. There is a mathematical formula described in detail in various online sources, including Wikipedia, so I won’t delve into that here. This cap, set at 21 million coins, will be reached when the last coin is mined (again, see Wikipedia). This is variously estimated to likely occur in the year 2140.

What makes Bitcoin Valuable?

So this ‘capped’ reality also adds to value, since like most stores of value, there is a rarity to bitcoin, a fixed number in existence today, and a maximum number that will ever exist.
In addition, more and more organizations are accepting bitcoin as a payment method. This increase in utility, and subsequent liquidity (it’s not always easy to sell units of bitcoin less than full coins) has also increased the perceived value of the coin.
Contributing to this climb in value recently has been the CryptoKitties phenomenon; a gaming application that rose to popularity far more rapidly than its creators could have foreseen. The subsequent media exposure thrust blockchain, and correspondingly bitcoin, further into the limelight, and the value continued to spike.
Lastly, the CBOE Options Exchange announced that on Monday, December 11th, they will begin trading bitcoin futures. Once again, this action broadcast to a widening audience that bitcoin was real, viable, and worth looking at as a part of some portfolios.; adding both legitimacy, as well as ease of trade to the mix.
The number of prognosticators calling bitcoin a farce seems near equal to the number calling for a coin to hit a $1 million valuation in 4 years. Who will be right remains to be seen.
For the moment, this author sees this as a bit like Vegas gambling. It’s fun, it’s legal, but you can also lose every penny you gamble; so bet (invest) only what you can afford to lose, and enjoy the ride.

What Digital Cats Taught Us About Blockchain

Given the number of cat pictures that the internet serves up every day, perhaps we shouldn’t be surprised that blockchain’s latest pressure-test involves digital cats. CryptoKitties is a Pokémon-style collecting and trading game built on Ethereum where players buy, sell, and breed digital cats. In a matter of a week, the game has gone from a relatively obscure but novel decentralized application (DAPP) to the largest DAPP currently running on Ethereum. Depending on when you sampled throughput, CryptoKitties accounted for somewhere in the neighborhood of 14% of Ethereum’s overall transaction volume. At the time I wrote this, players had spent over $5.2 million in Ether buying digital cats. The other day, a single kitty was sold for over $117,000.

Wednesday morning I attended a local blockchain meet-up, and the topic was CryptoKitties.

Congestion on the Ethereum node that the player was connected to was so bad, gas fees for buying a kitty could be as high as $100. The node was so busy that game performance was significantly degraded to the point where the game became unusable. Prior to the game’s launch, pending transaction volume on Ethereum was under 2,000 transactions. Now it’s in the range of 10,000-12,000 transactions. To summarize: A game where people pay (lots of) real money to trade digital cats is degrading the performance of the world’s most viable general-purpose public blockchain.

If you’re someone who has been evaluating the potential of blockchain for enterprise use, that sounds pretty scary. However, most of what has been illustrated by the CryptoKitties phenomenon isn’t news. We already knew scalability was a challenge for blockchain. There are a proliferation of off-chain and side-chain protocols emerging to mitigate these challenges, as well as projects like IOTA and Swirlds which aim to provide better throughput and scalability by changing how the network communicates and reaches consensus. Work is ongoing to advance the state of the art, but we’re not there yet and nobody has a crystal ball.

So, what are the key takeaways from the CryptoKitties phenomenon?

Economics Aren’t Enough to Manage the Network

Put simplistically, as the cost of trading digital cats rises, the amount of digital cat trading should go down (in an idealized, rational market economy that is). Yet both the cost of the kitties themselves – currently anywhere from $20 to over $100,000 – and the gas cost required to buy, sell, and breed kitties has gone up to absurd levels. The developers of the game have also increased fees in a bid to slow down trading. Up to now, nothing has worked.

In many ways, it’s an interesting illustration of cryptocurrency in general: cats have value because people believe they do, and the value of a cat is simply determined by how much people are willing to pay for it. In addition, this is clearly not an optimized, nor ideal, nor rational market economy.

The knock-on effects for the network as a whole aren’t clear either. Basic economics would dictate that as a resource becomes more scarce, those who control that resource will charge more for it. On Ethereum, that could come in the form of gas limit increases by miners which will put upward pressure on the cost of running transactions on the Ethereum network in general.

For businesses looking to leverage public blockchains, the implication is that the risk of transacting business on public blockchains increases. The idea that a CryptoKitties can come along and impact the costs of doing business adds another wrinkle to the economics of transacting on the blockchain. Instability in the markets for cryptocurrency already make it difficult to predict the costs of operation for distributed applications. Competition between consumers for limited processing power will only serve to increase risk and likely the cost of running on public blockchains.

Simplify, and Add Lightness

Interestingly, the open and decentralized nature of blockchains seems to be working against a solution to the problem of network monopolization. Aside from economic disincentives, there isn’t a method for ensuring that the network isn’t overwhelmed by a single application or set of applications. There isn’t much incentive for applications to be good citizens when the costs can be passed on to end-users who are willing to absorb those costs.

If you’re an enterprise looking to transact on a public chain, your mitigation strategy is both obvious and counter-intuitive: Use the blockchain as little as possible. Structure your smart contracts to be as simple as they can be, and handle as much as you can either in application logic or off-chain. Building applications that are designed to be inexpensive to run will only pay off in a possible future where the cost of transacting increases. Use the right tools for the job, do what you can off-chain, and settle to the chain when necessary.

Private Blockchains for Enterprise Applications

The easiest way to assert control over your DAPPs are to deploy them to a network you control. In the enterprise, the trustless, censorship-free aspects of the public blockchain are much less relevant. Deploying to private blockchains like Hyperledger or Quorum (a permissioned variant of Ethereum), gives organizations a measure of control over the network and its participants. Your platform then exists to support your application, and your application can be structured to manage the performance issues associated with blockchain platforms.

Even when the infrastructure is under the direct control of the enterprise, it’s still important to follow the architectural best practices for DAPP development. Use the blockchain only when necessary, keep your smart contracts as simple as possible, and handle as much as you can off-chain. In contrast to traditional distributed computing environments, scaling a distributed ledger platform by adding nodes increases fault tolerance and data security but not performance. Structuring your smart contracts to be as efficient as possible will ensure that you make best use of transaction bandwidth as usage of an application scales.

Emerging Solutions

Solving for scalability is an area of active development. I’ve already touched on solutions which move processing off-chain. Development on the existing platforms is also continuing, with a focus on the mechanism used to achieve consensus. Ethereum’s Casper network proposes to change the consensus mechanism to a proof-of-stake system, where miners put up an amount of cryptocurrency as proof that they aren’t acting maliciously. While proof-of-stake has the potential to increase throughput, it hasn’t yet been proven to be.

Platforms built on alternatives to mining are also emerging.

IOTA has been gaining traction as an Internet of Things scale solution for peer-to-peer transacting. It has the backing of a number of large enterprises including Microsoft, is open-source, and freely available. IOTA uses a directed acyclic graph as its core data structure, which differs from a blockchain and allows the network to reach consensus much more quickly. Swirlds is coming to market with a solution based on the Hashgraph data structure. Similar to IOTA, this structure allows for much faster time to consensus and higher transaction throughput. In contrast to IOTA, Swirlds is leaderless and Byzantine fault tolerant.

As with any emerging technology, disruption within the space can happen at a fast pace. Over the next 18 months, I expect blockchain and distributed ledger technology to continue to mature. There will be winners and losers along the way, and it’s entirely possible that new platforms will supplant existing leaders in the space.

Walk Before You Run

Distributed ledger technology is an immature space. There are undeniable opportunities for early adopters, but there are also pitfalls – both technological and organizational. For organizations evaluating distributed ledger, it is important to start small, iterate often, and fail fast. Your application roadmap needs to incorporate these tenets if it is to be successful. Utilize proofs of concept to validate assumptions and drive out the technological and organizational roadblocks that need to be addressed for a successful production application. Iterate as the technology matures. Undertake pilot programs to test production readiness, and carefully plan application roll out to manage go-live and production scale.

If your organization hasn’t fully embraced agile methods for application development, now is the time to make the leap. The waterfall model of rigorous requirements, volumes of documentation, and strictly defined timelines simply won’t be flexible enough to successfully deliver products on an emerging technology. If your IT department hasn’t begun to embrace a DevOps-centric approach, then deploying DAPPs is likely to meet internal resistance – especially on a public chain. In larger enterprises, governance policies may need to be reviewed and updated for applications based on distributed ledger.

The Future Is Still Bright

Despite the stresses placed on the Ethereum network by an explosion of digital cats, the future continues to look bright for distributed ledger and blockchain. Flaws in blockchain technology have been exposed somewhat glaringly, but for the most part these flaws were known before the CryptoKitties phenomenon. Solutions to these issues were under development before digital cats. The price of Ether hasn’t crashed, and the platform is demonstrating some degree of resilience under pressure.

We continue to see incredible potential in the space for organizations of all sizes. New business models will continue to be enabled by distributed ledger and tokenization. The future is still bright – and filled with cats!


What is a Blockchain? Infographic

So, what is a blockchain?

Before we dive into the What is a Blockchain? infographic, let me first explain why I created it. Or, you can simply scroll down to the infographic and bypass my incredible words of wisdom. Words of wisdom that have surely never been typed before…anywhere, ever.
I frequently take on new tasks, both personally and professionally, blatantly involving pieces and/or processes that are outside of my current skillset.
Why would anyone do this? Because I want to cram as much information into my brain as humanly possible before I can’t cram it in anymore.
What if you suddenly became incapable of learning? Wouldn’t you miss the option to be able to do so? I know that I would.

If you’re able to learn something new and/or grow your skillset, why in the world would you choose not to?

I think we can all agree that at times learning a subject or a process is a breeze, other times, not so much.
The point I’m really getting at here, is that with no prior experience in the solutions industry, I’ve had to work through the challenges of learning a plethora of products and services that I was completely ignorant to less than a year ago. Without diving into my feelings too much here, I can tell you there have been headaches, tears, and even points where I was fairly certain that my brain was so crowded and overworked that it just up and left the building.
However, after the chaos has settled from the information warriors battling their way into the crevices of my brain, the satisfaction of the new knowledge and how it applies elsewhere is indescribable. That satisfaction holds especially true for me in the solutions industry.

Our industry is packed with relevant, exciting, world-changing information that spans across nearly every other industry, and I feel so lucky to play even a tiny part in that.

I created this blockchain infographic to better understand what a blockchain is, while reading Chuck’s post: How much do you know about blockchain and is it just hype?
I find it easy to dive into a good book and paint an entire world of characters in my mind; but nothing helps me grasp intangible objects quite like a visual. So, if you’re struggling with the concept of blockchain, my goal is that this visual will help you in the same way that it did for me.

What is a Blockchain? Blockchain explained in an infographic. Prefer a PDF? Grab it here. 

How much do you know about Blockchain and is it just hype?

Blockchain Basics: a Primer

Every short while, a technology comes along that promises to turn everything upside down.

Sometimes this happens, sometimes it’s hype.

Think of Yahoo’s search in it’s early days, later overturned by Google’s better algorithms and business model (they did, after all, download the entire internet at one time). There was peer-to-peer networking, popularized by Napster, Application (App) stores, and now, Blockchain has the valley, and startups buzzing away.

But is this hype or reality? Perhaps some of both.

Let’s start by defining Blockchain & Bitcoin

So what is Blockchain?

Blockchain is, at it’s a core, a new way to code, somewhat specific to assets, and primary as things relate to chain of custody.

It started with Bitcoin; but what is Bitcoin?

Bitcoin is one of many (though perhaps the most well known) of a new type of currency called crypto currency (aka digital currency).

The crypto references the highly secure nature of it. It is a virtual currency. There is no physical coin, bill, or other instrument. It’s computer code, plain and simply.

Bitcoin was first mentioned in a now infamous white paper authored by a person, or persons using the pseudonym Satoshi Nakamoto in 2008.

Though by no means the first reference to a digital currency, this paper detailed an innovative peer-to-peer electronic monetary system called Bitcoin that enabled online payments to be transferred directly, without an intermediary: person-to-person, or institution-to-institution.

It was built on what we now call Blockchain.

While obvious on the surface, there are dramatic limitations to physical transactions that are one-to-one. Person-to-person, entity-to-entity; both parties have to agree on value, typically both parties have to be present, and both parties have to bring along the matter and currency to be transacted.

In short, this doesn’t scale well.

This process led to the evolution from the barter systems of days gone by, to the establishment of monetary systems by the Romans and other societies to set published values for marks, coinage, and other instruments of currency (aka – a common currency).

Common currency led to the development of banks and other intermediary systems, like Federal Reserve banks, central banks, and other regulatory bodies, who set established value for mutually agreed upon instruments, whether they be coins, or paper money.

Yet these intermediaries have grown in power, can delay processing, and some feel, do not always add the value to the transaction that they charge to conduct it. These intermediaries do still provide valuable services; they track our funds, lend funds, and clear transactions for us when needed.

Imagine showing up to a house closing with a bag of gold.

No need, a cashier’s check from the bank, against a mortgage (another monetary instrument) is all you need (plus lots of contract paperwork).

So how might we move forward to a system both digital, yet trusted by all, whilst not compromising security?

Let’s track back to where we began: Bitcoin vs Blockchain

Bitcoin is a digital currency, built on a technology we call Blockchain. Blockchain is a distributed ledger technology; distributed, meaning, that multiple systems across the internet store identical information about an asset, or a data file.

Technically, these are redundant data files, kept in synchronization, that can be stored on the public internet, or in a closed, secured system, or both.

In the current, traditional banking system, our accounts are stored in a single centralized database. If a person transacts business (think of going to an ATM, or cashing a check) at a bank that they don’t hold an account at, the system we are accessing must link to and validate our information from said person’s home bank where the account records live.

When a digital transaction is carried out on a currency built on Blockchain (Bitcoin is but one of many digital currencies), it is grouped together in a cryptographically protected block with other transactions that have occurred in the last set amount minutes (typically ten minutes) and sent out to the entire network. From there, Miners (members in the network with high levels of computing power-basically powerful, specially constructed servers) then compete to validate the transactions by solving complex coded problems. The first miner to solve the problems and validate the block receives a reward. (In the Bitcoin Blockchain network, for example, a miner would receive Bitcoins).

The validated block of transactions is then timestamped and added to a chain in a linear, chronological order. New blocks of validated transactions are linked to older blocks, making a chain of blocks that show every transaction made in the history of that blockchain. The entire chain is continually synched with each instance so that every ledger in the network is the same, giving each member the ability to prove who owns what at any given time.

The Evolution of Blockchain

One example of the evolution and broad application of blockchain, beyond digital currency, is the development of the Ethereum public blockchain, which is providing a way to execute peer-to-peer contracts.

It is this decentralized, open and secure attribute, that allows for trust between parties, and eliminates the need for intermediaries. It’s also important to note that traditional hacking type attacks would struggle to crack this widespread system. You might be wondering why and/or how would hackers struggle to crack this widespread system? They would struggle since multiple systems and files would need to be accessed in order to execute a traditional hacking type attack, and almost simultaneously; meaning, the likelihood and feasibility of this happening hovers somewhere right around zero.

So is this hype or reality?

It is real enough that TxMQ has committed to building a Center of Excellence focused on building Blockchain solutions for our customers.

Already, use cases are being evaluated for industries as widespread as the airlines, global logistics, pharmaceuticals, banking and finance, and even personal health records, auto manufacturers, and real estate transactions. Imagine following the custody chain of drugs from point of manufacturer to ultimate consumption or destruction. Imagine the value to a car manufacturer if they knew the precise ownership and chain of custody of not just every vehicle manufactured, but of each and every after market part produced.

So our money is on reality more than hype.

Certainly, not all coding need be done using blockchain; yet the ability to digitize assets, and track the precise chain of custody, is game changing.

There are countless millions globally who are counted among the unbanked; whether they be people in areas too rural, or people who are just too distrustful of these systems. Yet, most of the population has a cell phone, and with that instrument, can have access to this newfound democratization of society. We’re already seeing companies like Apple hint at introducing peer to payment into their future operating systems.

For more information on Blockchain and Blockchain solutions, feel free to call or email us.

I’m always interested in hearing about new startup ventures, or talking with other cutting edge thinkers interested in Blockchain, digital currency mining, and other cutting edge ways of solving today’s challenges. Look me up at TxMQ.com, my personal blog at Chuckfried.com, or find me on LinkedIn.