Digital currencies have been gaining traction for some time now, and although I had a broad sense of what they did and how they could be used, I hadn’t had an opportunity to utilise them in a real world setting. So, I set some personal learning goals and set about achieving them:

To learn the terminology associated with digital currencies, in particular Bitcoin, and the blockchain, which would serve as a foundation for building my knowledge

To undertake some practical exercises involving the actors, methods and marketplaces for digital currency, allowing me to explore limitations, current and future applications, and understand the enterprise use cases for the blockchain.

Buying the 21.co bitcoin computer

The initial research indicated that the 21.co bitcoin computer would be a good place to start. What drew me to it was that it was backed by some big names in the industry, and its approach to a digital currency marketplace was unique; leveraging micro payments for micro transactions such as sending an SMS or an email. Based on Raspbian and running Linux also gave it bonus points 🙂

The first problem encountered was that it didn’t ship to Australia. Challenge accepted.

“This hardware is not available for shipping to your country”. Challenge accepted. — Kathy Reid (@KathyReid) March 12, 2016

Having already set up an Australia Post Digital Mailbox, it was super easy to establish a ShopMate account. The experience here was seamless, and for an additional $AUD 43 my 21.c0 bitcoin computer was shipped from Portlandia to Australia. Win!

The cost of the computer was a bit steep at $USD 399, which worked out to just under $AUD 600 with the woeful exchange rate. Still, I figured this was cheaper than say a formal course on bitcoin or blockchain.

Initial steps

Unboxing, as many fellow geeks will resonate with, is a ritual, and an integral part of any large tech purchase. The 21.co didn’t disappoint. The packaging was sleek, black, minimal and beautifully put together. The Raspberry Pi-based computer was nestled comfortably in black firm styrofoam, with the power cords and accessories stashed underneath.

Inside the box was the 21.co bitcoin computer itself, power cord, and USB cable to connect the board to your computer for initial setup. The USB cable actually had four connectors, but the 21.co board has three pins. The unneeded connector (red) had been cut off, to make setup easier. This was a small detail, but indicative of the thought that had been put into the product. A USB wireless adaptor was included in the box, without which the product would have been almost unusable, so this was a great inclusion. Perhaps the only improvement suggestion here would be to use a WiFi adaptor that supports both the 2.4GHz and 5GHz ranges – my router runs two SSIDs, one on each range, and the included WiFi adaptor was only able to connect to the 2.4GHz SSID.

The only component that wasn’t initially included that I had to hunt up was a US -> ANZ power adaptor, which is forgivable considering 21.co don’t technically ship to Australia.

The next step was to connect my Ubuntu 14.10 LTS-based laptop to the 21.co and run some setup software. This was excellently documented, with instructions inside the box itself, and also prominently displayed on the 21.co website. What I really liked about the setup was that there was an automatic version, and a manual version if you had more experience on a Linux CLI. There were also options for other operating systems.

I got a little bit stuck on the initial setup, and couldn’t get the setup.py script to run. Initially, I wondered whether I’d triggered an unsafe shutdown of the device, and it was trying to re-index the database, so I let it run setup overnight. This didn’t fix the issue, so I jumped on to the 21.co support Slack (about 0700hrs Australian Eastern Standard Time – so GMT +1000hrs), thinking that no one would be online. Not only was support readily available, it was helpful, polite, friendly, and assumed that technically I knew what I was doing – an excellent support experience. In the end, it was a total n00b issue – the microSD card in the 21.co computer wasn’t seated correctly!

#21co first steps with #bitcoin and #blockchain A photo posted by @kathyreid_id_au on Apr 5, 2016 at 6:04am PDT

Learning a bit more

Once I had run setup successfully, I was able to mine my first Satoshis (sub-units of Bitcoin currency). Because it’s now difficult to mine Bitcoin directly, due to the computational complexity, a single machine has a very low probability of successfully mining a Bitcoin block. To work around this limitation, 21.co facilitates a collective approach called buffered pooled mining. In this scenario, many 21.co computers work co-operatively to mine Bitcoin, and collectively distribute the rewards. This means that you may only receive a few thousand Satoshis per day, but it’s sufficient to learn the concepts involved and start to prototype applications and ecosystems that leverage Bitcoin and the blockchain.

The next challenge was to see if I could set up a simple application that utilised the 21.co infrastructure to provide services for micro payments of Bitcoin. Using the tutorial, it was reasonably quick and easy to do. I found all the tutorials were written in really clear, simple terms, and stepped you through the different concepts being demonstrated in a very logical way. There were a few glitches along the way, mostly to do with package management and dependencies, so having at least a basic grasp of apt and pip was very useful.

I’m not sure where I’ll go next with this hardware – perhaps a micropayment webservice or too, but even with the initial steps here I’ve got a much better understanding of how Bitcoin and blockchain concepts can be applied more broadly. I could choose to run the 21 Bitcoin computer as a full Bitcoin node, but my internet connection is so slow that it probably isn’t worth it.

Use cases for the blockchain

The foundation of digital currency – the blockchain – has implications far beyond monetary transactions. The blockchain itself models provenance – the ownership of an asset (in the case of digital currencies, monetary assets) over time. Could it be applied to the physical as well as digital world, for instance to record the change of ownership of physical assets? I’m not so sure.

Physical and digital assets have different properties that may limit the blockchain’s applicability to the physical world – for instance physical assets such as cars, houses and jewellery can both be destroyed, or reconfigured. For instance, I could take piece of clothing and burn it, thus destroying it. The blockchain – or at least the Bitcoin blockchain, cannot easily handle such a use case, and the protocol would need to be extended to do so. It also cannot handle the reconfiguration of assets. Let’s say that I have a string of pearls, with 100 pearls on the string, that was given to be my by mother. The blockchain could record the change of ownership from my mother to I, but let’s say that I cut the string of pearls in half, creating two shorter strings with 50 pearls each, and then I gift one of the 50-pearl strings to my sister. The blockchain could handle this monetarily – splitting one value into two values, each distributed to separate owners, but it could not handle this physically – but recognising that two separate assets had been created where one previously stood. Of course, it’s possible that in time extensions or additions to the blockchain would address these shortcomings – it will certainly be an interesting thread to track.

Privacy and identification in the blockchain are also of interest. The blockchain itself doesn’t identify participants in transactions, which is great for privacy, but not so great for transparency. I suspect we’ll see the rise of services such as OneName which help to identify participants. For instance, imagine if government transactions were on the blockchain – you’d want them to be transparent.

Of course the blockchain itself also represents a unique big data source. As the use of Bitcoin evolves over time, it would be an interesting exercise to observe trends or changes in the patterns of transactions – such as average value, the frequency that BTC was transferred to or from particular addresses and so on.

Another interesting application of blockchain could be in content management and for handling versioning – as essentially a content management system is a series of assets that are mutative via known transaction types. Using blockchain for content management would also help to solve some of the problems around “what did a particular asset or collection of assets look like at a point in time” – as the blockchain contains an entire historical record.

A fascinating area.