Top Crypto News – 24/11/2017

Ether just set a new all-time record above $400


The price ether, the digital token used on the ethereum blockchain set a new record high in trading today, at just under $415. It has been a good year for the cryptocurrency, which has appreciated by a cool 5,000% (or so) since January, when it was trading at $8. So far today, the cryptocurrency has gained more than 8%.

All the ether in circulation is now worth $39 billion, compared with bitcoin’s $137 billion. The market value of all cryptocurrencies in circulation, meanwhile, has just passed the quarter-of-a-trillion mark, according to data provider CoinMarketCap.

As ever, the question that arises about the soaring ether price is: Why? One clue may be in a chart that has started circulating among cryptocurrency traders. It compares the number of ethereum transactions against other cryptocurrencies, with ethereum’s 534,000 transactions over the past day accounting for over 50% of all cryptocurrency trades. This suggests traction among users, which in turn suggests the demand for ether is on the rise.

However, transaction volumes don’t tell the whole story. Because ethereum contains a programming language that lets developers write applications that interact with its blockchain, many transactions could also be automated by programs. It’s not clear what percentage of transactions are done by bots or applications, or the significance of that data for extrapolating user adoption. In other words, and as always with cryptocurrency prices, the factors underlying the surge remain mysterious.


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Why America’s Biggest Bank Digs Anonymous Cryptocurrency



A JPMorgan collaboration with the tiny startup Zcash shows how serious financial institutions are about blockchain technology.

Whatever JPMorgan Chase CEO Jamie Dimon meant last month when he called Bitcoin a “fraud,” he sure doesn’t seem to view its blockchain in the same light.

His bank is at the forefront of the effort to adapt the technology for use in the financial industry. Even more surprising, though, is JPMorgan’s collaboration with the people behind a digital currency that’s like Bitcoin except completely anonymous.

It would be understandable if Dimon and other bank CEOs viewed Bitcoin and its cryptocurrency siblings as a threat. After all, Bitcoin, launched during the height of the Great Recession, shows it’s possible to use software and thousands of computers connected via the Internet—instead of a bank—to facilitate the peer-to-peer exchange of money. The computers in the network maintain a secure ledger of every transaction, called a blockchain, and use it to prevent counterfeiting (see “What Bitcoin Is, and Why It Matters”).

No matter what bank executives think about Bitcoin’s currency, though, they see in its blockchain a revolutionary platform that could lead to more secure, reliable, and cost-effective systems for managing all kinds of financial transactions. It’s early, though, and most of the work on so-called “enterprise blockchains” is experimental. What’s not yet clear is the degree to which financial institutions can adapt the technology to their own needs without sacrificing its advantages—particularly its decentralized nature, which is key to protecting the information in the ledger from getting corrupted.

Privacy is a particularly complicated challenge. Contrary to widespread perception, cryptocurrencies like Bitcoin and Ethereum are not anonymous. Users are represented on the public ledger by a string of characters called an address. Someone who manages to connect your identity to your address can see every transaction you’ve ever made (see “Criminals Thought Bitcoin Was a Perfect Hiding Place, But They Thought Wrong”).

That model doesn’t work for financial institutions, says Amber Baldet, blockchain lead at JPMorgan. Not only are they bound by anti-money-laundering laws to know exactly who their customers are, but their customers want to transact confidentially. Shifting from Bitcoin’s privacy model to one in which participants are known but their transactions are confidential—while maintaining the benefits of a blockchain—is a “nontrivial” endeavor, says Baldet.

Fortunately for Baldet’s team, this thorny problem is similar to another one that already appears to be solved: cryptocurrency that’s as private as cash. In May, JPMorgan announced that it would team with the developers of Zcash, a year-old cryptocurrency whose Bitcoin-derived software gives users the option to “shield” their transactions from public view. Last month, the bank revealed that it had integrated Zcash’s privacy technology into Quorum, its open-source, Ethereum-derived, permissioned blockchain platform.

Zcash relies on an emerging cryptographic protocol called a zero-knowledge proof. One of several techniques that make it possible for cryptocurrency users to hide their transactions, zero-knowledge proofs are generating a huge amount of excitement in the blockchain world, largely because of the mind-bending power they can give a user: the ability to prove something about yourself to someone else without having to reveal any additional information.

In the case of Zcash, users can use this method to prove that they have sufficient funds to make a valid transaction. In an enterprise system like JPMorgan’s Quorum, customers could use it to do things like prove they are accredited investors.

Zooko Wilcox, the company’s CEO, says Zcash’s ultimate goal is to “provide economic opportunity and financial freedom to every human.” He calls Zcash’s openness—as with Bitcoin, anyone can join the network—a “moral imperative,” and his team is stacked with world-renowned cryptography experts who share his vision (see “Why People Get Religious about Bitcoin”).

Why would a tiny startup made up of crypto-idealists team up with America’s biggest bank, the very kind of centralized authority that Bitcoin was designed to circumvent?

Wilcox and his colleagues seem, above all else, devoted to advancing zero-knowledge technology—whether that be in open blockchain systems like Zcash, Bitcoin, and Ethereum or in the private networks that financial institutions are building. In a statement last month touting JPMorgan’s integration of zero-knowledge functionality, Wilcox said, “The momentum that is growing behind enterprise blockchain adoption is one of the most exciting trends in technology.”

That JPMorgan is interested in the same cutting-edge privacy technology so attractive to cryptocurrency nerds is not surprising at all, says Emin Gün Sirer, a computer scientist at Cornell University. Zero-knowledge proofs are not about skirting the law, he says, but about proving things though selective disclosure. That promises to have plenty of applications in the world JPMorgan inhabits. “The finance industry thrives on privacy,” Gün Sirer says.

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Discovering the makings of a successful cryptocurrency


Bitcoin is facing competition from younger, faster, funnier and more creative rivals. But, Kim Darrah asks, where is it all leading us?

If you were to ask 10 different people what makes a cryptocurrency successful, you would get 10 different answers. And yet, today’s wave of crypto-mania makes this a relevant question. Since the start of 2017, cryptocurrency valuations have stuttered their way to giddy new highs. In August, for the first time ever, the total value of cryptocurrencies exceeded $150bn – up from $25bn just five months earlier.

By the beginning of September 2017, the market capitalisation of bitcoin had surged by 500 percent since the beginning of the year. And yet, bitcoin itself is not the main focus of the crypto-boom – this is instead centred on the less-well-known world of ‘altcoins’. In fact, at the time of writing, the two biggest cryptocurrencies following bitcoin – Ripple and Ether – have both seen their market capitalisation rocket by over 2,000 percent since the start of 2017.

As a result, bitcoin is no longer the all-dominating presence it once was. For years it has taken up around 80 percent of the sector, but its market capitalisation has now dipped below that of the combined total of other cryptocoins. This brings its market presence to below 50 percent for the first time ever.

New bids on the block
There are now close to 1,000 cryptocurrencies in existence, and success stories are easy to come by. At the more outrageous end of the spectrum is Dogecoin, a cryptocurrency built around an internet meme. Initially introduced as a joke, the currency’s logo features ‘doge’, the wide-eyed Shiba Inu dog-turned-meme, who is accompanied by meme-inspired font, Comic Sans.

Despite the fact it was more or less invented as a parody cryptocurrency, the coin quickly gained a network of admirers willing to buy in. The concept was popular, and in the world of cryptocurrencies, popularity equals value. Dogecoin recently jumped to a market capitalisation of $189m.

The story of Dogecoin is an excellent reflection of the absurdity of the cryptocurrency market, but this is also just one side of it. The reality is that while it appears as if bubbles are emerging in every corner of the market, cryptocurrencies also have a growing number of more practical uses.

Many crypto success stories consist of those currencies that were created in bitcoin’s image, but with various tweaks to make them function a little better. The result is a scattering of competing currencies with attributes that can be handpicked depending on one’s personal priorities, be it security, privacy, anonymity or speed. For instance, Litecoin was set up in 2011 and is almost technologically identical to bitcoin. However, it boasts certain enhancements, like a more efficient mining protocol and a greater processing speed for transactions.

It reached a market capitalisation of $4bn for the first time in September, and is now the fifth most successful cryptocurrency (by market capitalisation) after bitcoin, Bitcoin Cash, Ripple and Ether. Another example is Monero, which offers a similar function to bitcoin, but with enhanced privacy and improvements in scalability. Working on a similar theme, Anoncoin boasts strict anonymity, while Stablecoin claims to have military-grade encryption.

Many such currencies were able to gain traction by tackling bitcoin’s faults. And yet, the recent excitement behind two of the most successful cryptocurrencies is focused on possible applications beyond those of bitcoin and its lookalikes: According to Hanna Halaburda, author of Beyond Bitcoin: The Economics of Digital Currencies: “While bitcoin is a self-contained cryptocurrency, Ether and [Ripple] are cryptocurrencies supporting broader systems, each with a different functionality.”

Ripple makes waves
Perhaps more than any other, Ripple’s tailor-made currency XRP is the cryptocurrency of the moment. It caught headlines earlier this year after its value increased by 4,000 percent in the first half of 2017.

Ripple itself is a start-up that provides the framework for a cross-border payments system. Its primary motivation is to tackle the very practical problem of the world’s slow and costly payments architecture. Its protocol supports various currencies, including bitcoin, dollars and even units of value like frequent flyer miles.

XRP’s characteristics are determined by its role within the wider framework. According to Daniel Aranda, Managing Director of Ripple’s European division: “That includes a few requirements. One is scalability – the XRP blockchain is already able to handle over 1,000 transactions per second. It also includes speed – you can actually settle on the blockchain within just two to five seconds.”

Ripple’s goal is to build a next-generation cross-border payment system that will allow for any unit of value – whether it’s a dollar, a bitcoin, or even a tenth of a penny – to be moved easily around the world in a matter of seconds.

Part of the momentum behind Ripple is its emphasis on carving out a position in the established financial system. While bitcoin operates largely outside the system, Ripple has now partnered with more than 100 banks, and is developing software that is specifically tailored towards bringing solutions to players in the sector.

Aranda explained: “Our whole goal as a company is to take blockchain and cryptocurrency out of a more experimental and speculative mindset, and have it be driven by the real economic activity, which abides by real use cases.”

While Ripple’s attention is now concentrated on cross-border payment infrastructure, its wider goal is much more ambitious. “We think that these cryptocurrencies and new protocols will be able to create an internet of value,” said Aranda. One protocol currently under development is the interledger, which can connect blockchain ledger technology with traditional centralised ledgers.

This kind of infrastructure, according to Aranda, could enable a whole series of use cases that we can’t even imagine yet, and could provide the basis of a whole new generation of online businesses.

In essence, for Ripple, the XRP currency is simply a tool through which to achieve some very practical goals.

Getting smart
Ethereum has been the subject of a great deal of hype over recent months. Similarly to Ripple, Ethereum is a broader system that provides a new functionality over and above that of bitcoin. The cryptocurrency itself is known as Ether, and it holds many similar characteristics to bitcoin, such as inbuilt incentives for miners to verify transactions.

Ether’s momentum, however, lies in the fact that its broader framework enables smart contracts to be coded directly onto the blockchain. This smart contract functionality has been the subject of intense speculation amid promises of game-changing utility.

Crucially, the technology means that developers can code self-fulfilling contracts using Ether, cutting out the need for a middle man. A transaction can be pre-programmed so that it will only take place when a particular condition is fulfilled, such as if two parties have endorsed it.

For instance, a will or futures contract could move funds automatically based on instructions that had been written in the past.

Ultimately, these kinds of contracts could play a very practical role in the global economy. There are myriad possible applications based around transactions in trade and industry. However, they also have scope to expand beyond traditional contracts and enter the everyday.

One example is that a contract coded into the blockchain through Ethereum could be used to automatically unlock doors when someone transfers a payment to rent an office or flat.

Once again, however, the great promise for Ethereum is that smart contracts have the potential to be applied to purposes that are yet to be invented.

New money’s new appeal
The surge in attention garnered by bitcoin’s alternatives gives rise to the inevitable question of what is driving its value. Bitcoin emerged with the traction of a revolutionary technology that people valued for a range of reasons.

For some people, it was a libertarian triumph providing the hope of a system free of money-printing central banks. To others, it provided a convenient tool with which to evade government detection and engage in the dark economy. To many, anonymity was the essence of its appeal.

The key criticism that can be levied at all cryptocurrencies is that they have no intrinsic value. Unlike gold, which can be used for its physical properties, or dollars, which are given legitimacy by the US Government, they have no value outside of people’s belief in their worth.

And yet, they do exhibit something similar to intrinsic value. “Their usefulness is akin to intrinsic value (akin, because this usefulness does not exist without a network),” said Halaburda.

In this sense, recent developments and the apparent expansion of potential use cases for cryptocurrencies would suggest a positive momentum, especially given that some new altcoins are being directed towards purposes that are (somewhat) more practical and relevant to real life.

“However,” Halaburda continued, “the actual value of a currency comes mostly from expectations that it will be valued by others. These expectations may be unrelated to the intrinsic usefulness.” Indeed, while interesting new possibilities are arising with regard to cryptocurrencies, a speculative frenzy has stolen the show.

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US Defense Bill Could Give Big Boost to Blockchain


An obscure provision tucked into a defense spending bill could serve as a springboard for blockchain adoption across U.S. government agencies.

Part of a larger bill called the National Defense Authorization Act (NDAA), the Modernizing Government Technology Act (MGT) will allow the public sector to redirect cost savings (which normally must be returned to the Treasury Department) into internal working capital funds that can be used to upgrade their IT systems.

It authorizes agencies to use the working capital funds for modernization projects that fall into one of three buckets: cybersecurity, migrating legacy systems to the cloud and “other innovative platforms and technologies.”

As such, while blockchain is not explicitly mentioned in MGT’s text, it fits into the letter of the law’s parameters and objectives to advance the technology beyond the proof-of-concept stage at the agency level.

Based on what U.S. government officials have said in the past, Trey Hodgkins, senior vice president of public sector at the Information Technology Industry Council in Washington, D.C., told CoinDesk:

“Blockchain was clearly one of the technological capabilities that Congress meant for agencies to look at, and what they were trying to do was create dollars with some flexibility to them so that agencies would have their own discretion on what they invest in.”

Far from being held up in legislation, however, the MGT could soon have an impact. The NDAA has been passed by both the House of Representatives and Senate, and is awaiting President Donald Trump’s signature, at which point it would become law.

Blockchain catalyst

Companies looking to provide enterprise blockchain services to the public sector echoed Hodgkins’ optimism that the act could provide a pathway toward increased funding and experimentation at the governmental level.

“We are excited about the MGT Act because it provides incentives to federal agencies to move away from high-cost, low performing legacy systems toward new technologies, like blockchain and smart contracts,” said Todd Miller, U.S. markets lead at ChromaWay, a hybrid blockchain database provider in the process of opening a Washington D.C. office.

Jeremy Wilcox, managing director for public sector at technology consultancy ClearEdge Partners, said the act could be a “catalyst” for the technology, even if agencies were to only redirect a small percentage of the funds toward blockchain.

The flexibility afforded by the MGT could also give agencies some workaround to a congressional appropriations process that has been marred by political logjam.

Rather than passing annual budgets, Congress, in recent years, has passed a series of appropriations bills that temporarily extend what was authorized in the prior period. This dynamic has hamstrung agency’s efforts to secure funding for technology upgrades.

“Sadly, it’s a completely dysfunctional process, and for newer technologies, it’s really challenging to get an agency to the point where they have the ability to plan for and design and architect, and then go out and buy something and then deploy it,” said Hodgkins.

MGT could change that dynamic by giving agencies more discretion in deciding which technology upgrades to pursue and how to go about paying for them.

Speaking to this flexibility, Wilcox told CoinDesk:

“They won’t have to go to Congress and say, ‘Can we have a line item for blockchain in our budget?'”

Hurdles remain

But even though the MGT provides a window of opportunity for blockchain within government “modernization” projects, the technology must demonstrate it has utility at an enterprise level before agencies can fully embrace it.

While cloud computing and relational databases are proven in their reliability, their capacity to scale and their ability to replace existing legacy systems at a large organization like a government agency, blockchain solutions still have a ways to go in demonstrating that same level of credibility.

Government agencies are, after all, still grappling with the cybersecurity risks associated with blockchain.

In a separate section, the NDAA stipulates that the Pentagon monitor government agency adoption of blockchain for cybersecurity risks and provide a briefing to Congress within 180 days.

The bill states the Secretary of Defense must provide Congress with: “[A]n assessment of the use or planned use of such technologies by the Federal Government and critical infrastructure networks.”

This briefing must also include assessments of the technology’s use by foreign powers and criminal and extremist groups, but also “a description of potential offensive and defensive cyber applications of blockchain technology and other distributed database technologies.”

The latter item displays the government’s interest in taking advantage of blockchain technologies unique features to modernize cybersecurity practices.

“If blockchain is tied to modernization then it could be a part of that solution,” said Wilcox, concluding:

“Time will tell. It’s going to come down to what solutions or services are delivered.”

White House image via Shutterstock
Written by CoinDesk

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